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Finance

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Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments. The interest paid in the first year is: $_________.
(Please calculate the arithmetic solution and show your work)

  • Finance -

    Pt = Po*(1+r)^n.

    r = 11%/100% = 0.11 = APR expressed as a decimal.

    n = 1 comp./yr * 1yr = 1 compounding
    period.

    Pt = $10500*(1.11)^1 = $11655.

    I = Pt-Po = 11,655-10,500 = $1155.00.

  • Finance -

    Correct

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