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Question 756248: Maria wants to buy a car but has little money. The dealer offers $5,000 at 12% compounded daily for 7 years. Maria doesn't have to make monthly payments, but must pay off the loan in full after 7 years. How much must Maria pay?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! assuming there are 365 days in a year, the daily interest rate is equal to .12 divided by 365 which is equal to .000328767 per day.
the number of time periods is equal to 365 * 7 which is equal to 2555.
add 1 to the interest rate per day and raise that to the power of 2555 to get:
1.000328767 ^ 2555 = 2.316047218
multiply 5000 by 2.31..... to get 11580.23609
at the end of 7 years, she will have to pay the dealer $11,580.24.
with no payments, this is a future value of a present amount formula which is:
f = p * (1 + i/c) ^ (y * c)
f = future value
p = present amount
i = annual interest rate (apr)
c = number of compounding periods per year.
y = number of years
based on your information and assuming 365 days per year, the formula becomes:
f = 5000 * (1 + (.12/365)) ^ (7*365)
that becomes:
f = 5000 * 1.000328767 ^ 2555
use your calculator to get:
f = 11580.23609
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