SOLUTION: The question states "You take out a loan of $800 and the bank charges you 15% compounded interest per year. If *you don't pay off any of the loan in 4 years*, how much money would
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Question 873419: The question states "You take out a loan of $800 and the bank charges you 15% compounded interest per year. If *you don't pay off any of the loan in 4 years*, how much money would you owe them?"
I'm thinking of using this formula but I'm not sure
Found 2 solutions by jim_thompson5910, stanbon:
Answer by jim_thompson5910(35256) (Show Source): You can put this solution on YOUR website!
You are correct. Assuming it's compounded annually, you plug in
P = 800 (the amount loaned)
r = 0.15 (15% = 15/100 = 0.15)
n = 1 (compounding 1 time per year)
t = 4 (number of years)
If you are compounding at different rates, then you change the value of n. For example, if you compound it quarterly, then you compound 4 times a year (so n = 4). If you compound monthly, then n = 12.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
The question states "You take out a loan of $800 and the bank charges you 15% compounded interest per year. If *you don't pay off any of the loan in 4 years*, how much money would you owe them?"
Use this formula A(t) = P(1+r/n)^nt
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A(4) = 800(1+(0.15/1))^(1*4) = 800(1.15)^4 = $1399.21
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Cheers,
Stan H.
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