Suppose you borrow R500 from the bank for 6 semesters at an interest rate of 11,11% compounded yearly. What is the total amount that you should repay?
The interest rate of 11,11% compounded yearly means that every year, the amount owed will increase by 11,11% of the previous year's amount.
So, after the first year, the amount owed will be:
R500 + (11,11% x R500) = R555,55
After the second year, the amount owed will be:
R555,55 + (11,11% x R555,55) = R617,28
After the third year, the amount owed will be:
R617,28 + (11,11% x R617,28) = R685,94
After the fourth year, the amount owed will be:
R685,94 + (11,11% x R685,94) = R762,90
After the fifth year, the amount owed will be:
R762,90 + (11,11% x R762,90) = R849,62
After the sixth year, the amount owed will be:
R849,62 + (11,11% x R849,62) = R947,71
Therefore, the total amount to be repaid after 6 semesters is R947,71.