Matteo has a balance of $10,000 on a school loan and the compound interest rate is 4%. How much interest will he pay if he pays it off in 10 years?
$14,802.44
$4,000.00
$4,802.44
$14,000.00
$4,802.44
To calculate the total amount of interest paid, we can use the formula for compound interest: A = P(1+r/n)^(nt) - P, where:
A is the total amount after t years, including interest
P is the principal amount (initial amount borrowed)
r is the annual interest rate (decimal)
n is the number of times that interest is compounded per year
t is the number of years the money is invested/borrowed for
In this case, P = $10,000, r = 4% or 0.04, n = 1 (compounded yearly), and t = 10 years. Plugging these values into the formula:
A = $10,000(1+0.04/1)^(1*10) - $10,000
A = $10,000(1.04)^10 - $10,000
A = $14,802.44
Therefore, the total amount paid after 10 years would be $14,802.44, which means the total interest paid would be $14,802.44 - $10,000 = $4,802.44.