You find that a small business loan in the amount of 50,000 is the amount you need to purchase the restaurant location. After researching banks to find the best interest rate, you find that banks for small businesses offer the best interest rate of 9% interest that compounds monthly for 7 years.
What is the question?
Whats the monthly payment?
Show the formula that you used and the values used for each variable to calculate the monthly payment?
To calculate the total cost of borrowing the $50,000 small business loan with a 9% interest rate compounded monthly over a period of 7 years, you can use the formula for compound interest:
A = P * (1 + r/n)^(n*t)
Where:
A = the future value of the investment/loan including interest
P = the principal amount (the initial loan amount)
r = the annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, we have:
P = $50,000
r = 9% = 0.09 (as a decimal)
n = 12 (compounded monthly)
t = 7 years
Plugging these values into the formula, we get:
A = $50,000 * (1 + 0.09/12)^(12*7)
Calculating the compound interest using a calculator or spreadsheet, the future value of the loan A is approximately $84,913.77.
Therefore, the total cost of borrowing the $50,000 small business loan over 7 years with a 9% interest rate compounded monthly is approximately $84,913.77.