Calculate the final loan amount of a $500 credit card loan with a 16% compound interest rate, compounded monthly, for a 1-year term. (1 point)
Responses
To calculate the final loan amount, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = final loan amount
P = principal loan amount ($500)
r = annual interest rate (16% or 0.16)
n = number of times interest is compounded per year (12, since it is compounded monthly)
t = number of years (1)
Plugging in the values, we get:
A = 500(1 + 0.16/12)^(12*1)
A = 500(1 + 0.01333333)^(12)
A = 500(1.01333333)^(12)
A ≈ 543.06
Therefore, the final loan amount would be approximately $543.06.