Posted by Nieda on Thursday, September 15, 2011 at 9:38am.
Mr. Nielson wants to borrow $1,000 for 2 years. He is given the choice of
i) simple interest at 12%, or
ii) a loan at 10% compounded monthly.
Which loan results in less interest due ?
b) What interest rate compounded quarterly will give an effective interest rate of 7% ?

Math  Henry, Friday, September 16, 2011 at 5:03pm
1. I = Prt = 1000 * 0.12 * 2 = $240.
2. Pt = Po*r*t / (1  (1+r)^t,
r=(10% / 12) / 100% = 0.00833 = Monthly
% rate expressed as a decimal.
t = 2yrs * 12mo/yr = 24 Months.
Pt=1000*0.00833*24/(1  (1.00833))^24
= 199.992 / 0.180583955 = $1107.47.
I = 1107.47  1000 = $107.47
Option 2gives lowest Interest.
Answer This Question
Related Questions
 math  Belle had the choice of taking out a four year car loan at 8.5% simple ...
 math  The Sandersons are planning to refinance their home. The outstanding ...
 math  The Sandersons are planning to refinance their home. The outstanding ...
 Finite Math  The Sandersons are planning to refinance their home. The ...
 math  the total amount of interest on this loan of $6000 for 150 days is $210....
 compund interest  Payments of $1800 and $2400 weere made on a $10,000 variable...
 Algebra  A woman wants to borrow $11,000 in order to buy a car. She wants to ...
 math  Sonja needs to borrow $2,251 to pay for her college classes. Sallie Mae ...
 Business Math  You want to buy furniture which will cost N$ 20,000. You could ...
 Compound Interest : Future Value and Present Value  Payments of $1800 and $2400...
More Related Questions