Question

You chose a college loan plan that is compounded annually. You take out $10,000 on the loan, and it has an interest rate of 5.75%. If it takes you six years to pay off the loan, how much money will you have paid back by the end of the six years?

Answer 1

At the end of 6 years, he would have paid $13985.6

Explanation:

Initial amount taken as load is $10,000 This means that the principal

P = 10000

It was compounded annually. This means that it was cam pounded once in a year. So

n = 1

The rate at which the principal was compounded is 5.75%. So

r = 5.75/100 = 0.0575

it takes you six years to pay off the loan. So

t = 6

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount of money that you would have paid back by the end of the six years. Therefore

A = 10000 (1+0.0575/1)^1×6

A = 10000(1.0575)^6 = $13985.6