Suppose you borrow $500 and you plan to pay it back all at once in 5 years. You are charged 2% interest compounded monthly.
What is the total amount you will need to pay when the loan is due?
Round your answer to the nearest dollar.
550?
The answer is 553
I answered this for you early this morning.
https://www.jiskha.com/questions/1818962/suppose-you-borrow-500-and-you-plan-to-pay-it-back-all-at-once-in-5-years-you-are
Did you even look at it?
To calculate the total amount you will need to pay when the loan is due, you need to account for the principal amount borrowed and the interest accumulated over the 5 years.
First, let's calculate the interest rate per period. Since the interest is compounded monthly, we need to divide the annual interest rate by 12.
Annual interest rate = 2%
Interest rate per period = 2% / 12 = 0.02 / 12 = 0.00167 (or 0.167%)
Next, we need to calculate the number of periods. Since the loan is for 5 years and the interest is compounded monthly, we will have 5 years x 12 months = 60 periods.
Now, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A - represents the total amount to be paid when the loan is due
P - represents the principal amount borrowed ($500)
r - represents the interest rate per period (0.00167)
n - represents the number of times the interest is compounded per year (12)
t - represents the number of years (5)
Using the formula, we can calculate the total amount:
A = 500(1 + 0.00167/12)^(12*5)
A = 500(1 + 0.00167/12)^60
A ≈ 500(1.001389)^(60)
A ≈ 500(1.0832)
A ≈ 541.60
Rounding to the nearest dollar, the total amount you will need to pay when the loan is due is $542.
Therefore, the correct answer is $542, not $550.