Question 447438: To pay the tuition for medical school, Melissa borrowed $8400 in student loans her first year. The loan is for seven years at an annual interest rate of 3.4% with interest compounded semiannually. What will be the amount of principal and interest in seven years?
Answer by lwsshak3(11628)   (Show Source):
You can put this solution on YOUR website! To pay the tuition for medical school, Melissa borrowed $8400 in student loans her first year. The loan is for seven years at an annual interest rate of 3.4% with interest compounded semiannually. What will be the amount of principal and interest in seven years.
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You can use the compound interest formula for this kind of problem as follows:
A=P(1+r)^n, P=initial amount invested or borrowed in this case, r=interest rate per period, n=number of periods, and A=the amount after n periods. The difference between A and P is the amount of interest after n periods.
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For given problem:
P=$8400
r=.034/2=.017 (annual interest rate/2)
n=14 (number of compounding periods in 7 years)
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A=8400(1+.017)^14
=8400(1.017)^14
=$10635.86
Interest=A-P=10635.86-8400=$2235.86
ans:
In seven years the principal and interest will be $10635.86 and $2235.86, respectively.
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