The compound interest a teacher would have to pay the bank if she borrows
150 000 for 10 years at 12.5% per annum
To calculate the compound interest, we can use the following formula:
A = P(1 + r/n)^(nt)
Where:
A = Total amount including interest
P = Principal amount (initial loan amount)
r = Annual interest rate (as a decimal)
n = Number of times that interest is compounded per year
t = Number of years
In this case,
P = $150,000
r = 12.5% = 0.125 (convert percentage to decimal)
n = 1 (interest is compounded annually)
t = 10 years
Substituting the values into the formula:
A = 150,000(1 + 0.125/1)^(1*10)
A = 150,000(1.125)^10
Now, we can calculate A:
A = 150,000(1.125)^10
A ≈ 150,000(3.172)
Therefore, the total amount the teacher would have to pay back including compound interest would be approximately $475,800.
To calculate the compound interest, we can subtract the principal amount from the total amount:
Compound Interest = Total Amount - Principal Amount
Compound Interest = $475,800 - $150,000
Compound Interest = $325,800
So, the teacher would have to pay approximately $325,800 as compound interest over the 10-year period.