SOLUTION: Jim borrows $200 at 18% per annum compounded quarterly for 7 years. Determine the interest due on the loan.

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Question 1198387: Jim borrows $200 at 18% per annum compounded quarterly for 7 years. Determine the interest due on the loan.
Answer by MathLover1(20850) About Me  (Show Source):
You can put this solution on YOUR website!
The formula for annual compound interest is as follows:
A+=+P+%281%2B+r%2Fm%29%5E%28mt%29
Where:
A+- the future amount of the loan
P - the initial amount =>P=+200+
r+- the annual interest rate (in decimal)=>r=0.18
m+- the number of times the interest is compounded per year (compounding frequency)=>m=4
t+- the numbers of years the money is invested for=>t=7
A++=+200+%281%2B+0.18%2F4%29%5E%284%2A7%29
A++=+200+%281.045%29%5E28
A++=+200+%281.045%29%5E28
A++=685.94
A+=+P+%2B+I+where
P+=+200.00
I+=+485.94=>the interest due on the loan