SOLUTION: Scott borrowed $255 from a relative for 9 months. He agreed to pay compound interest at the rate of 4% per month. a) How much interest will he pay his relative when he returns th

Question 746439: Scott borrowed $255 from a relative for 9 months. He agreed to pay compound interest at the rate of 4% per month.
a) How much interest will he pay his relative when he returns the money at the end of the 9 months? Explain how you solve this problem.
b) Suppose Scott has to extend the loan to 10 months rather than 9 months. How much additional interest would he pay for the last month of the loan? Explain how you solve this problem.
Answer by Cromlix(4381) (Show Source): You can put this solution on YOUR website!
Compound interest at 4% = 104/100 = 1.04
$255 x 1.04^9 = $362.95.
a) $362.95 - $255 = $107.95 (interest at end
of 9 months)
b)$255 x 1.04^10 = $377.46
so $377.46 - $362.95 = $14.51 (extra interest
by extending loan to 10 months)
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