SOLUTION: Kyle Wong loans $12,000 to his brother-in-law. He will be repaid at the end of 9 years with interest at 8% compounded semiannually. Find out how much will be repaid.
Question 961374: Kyle Wong loans $12,000 to his brother-in-law. He will be repaid at the end of 9 years with interest at 8% compounded semiannually. Find out how much will be repaid. Found 2 solutions by mananth, ikleyn:Answer by mananth(16949) (Show Source):
You can put this solution on YOUR website! Kyle Wong loans $12,000 to his brother-in-law. He will be repaid at the end of 9 years with interest at 8% compounded semiannually. Find out how much will be repaid.
Compound interest formula
A= P(1+r/n)nt
A = Amount
P is the principal $12000
r= rate in decimal 8%= 0.08
n is the number of times that interest is compounded per unit 2 timesper year
t is the time the money is invested for, in years=9 years
A= 12000(1+0.08/2)^2*9
A = 12000*1.04^18= $24309.80
Amount to be repaid = $24309.80
You can put this solution on YOUR website! .
Kyle Wong loans $12,000 to his brother-in-law. He will be repaid at the end of 9 years
with interest at 8% compounded semiannually. Find out how much will be repaid.
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I don't know why @mananth treats the loan re-payments as a compound interest formula for cumulative ordinary annuity.
It is NEVER treated in Finance that way.
Usually, the loan re-payment problems are treated in totally different way.
Use the standard loan formula for semiannually payments
PMT =
where L is the loan amount; r = = 0.04is the effective semi-annual interest rate;
n is the number of payments (2*9 = 18 in this problem); PMT is the semi-annual payment.
In this problem P = $12000.
Substitute these values into the formula and get for monthly payment
PMT = = = $947.92.
Thus the semi-annual payment is $947.92.
In total, Kill Wong will pay 2*9*947.92 = 17062.56 dollars in 9 years. ANSWER
