Calculate the final loan amount of a $500 credit card loan with a 16% compound interest rate, compounded monthly, for a 1-year term.
$86.14
$586.14
$583.20
$580.00
To calculate the final loan amount, we can use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the final loan amount
P = the principal amount (initial loan amount)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
Given:
P = $500
r = 16% = 0.16
n = 12 (compounded monthly)
t = 1 year
Plugging in the values into the formula, we get:
A = $500(1 + 0.16/12)^(12*1)
A ≈ $500(1.0133333333333334)^12
A ≈ $500(1.195618934)
A ≈ $597.81
The final loan amount after 1 year would be approximately $597.81.
None of the provided options match the calculated amount.