Question

Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. the interest paid in the third year is ________. $352.00 $277.95 $405.00 $147.00

Answer 1

Using the formula for calculating the future value of an ordinary annuity, the interest paid in the third year can be found to be $427.22.

Step-by-step explanation:

When borrowing $4,500 from the bank at a 9% annual compound interest rate and repaying it in three equal annual installments, we can use the formula for calculating the future value of an ordinary annuity to find the interest paid in the third year.

The formula is:

FV = P * (1 + r)^n

Where:

• FV is the future value of the annuity
• P is the periodic payment (in this case, the annual installment)
• r is the interest rate per period (in this case, the annual interest rate divided by the number of installments per year)
• n is the number of periods (in this case, the number of years)

Using the formula, we can calculate the future value of the annuity after three years:

FV = 4500 * (1 + 0.09/3)^3

FV = 4500 * 1.03^3

FV = 4500 * 1.092727

FV = $4927.22

To find the interest paid in the third year, subtract the principal borrowed (4500) from the future value of the annuity (4927.22):

Interest Paid = 4927.22 - 4500

Interest Paid = $427.22

Answer 2

Problem: The interest paid in the third year.
Given: The bank loan of Rita is $4500, 9% monthly interest, Third year
Mathematical operation: multiplication
Solution: $4500 x.09 (9% converted percent to decimal)=n
Answer: $405 the interest on the third year.

Since the Rita is expected to pay monthly, if she pays on time she wouldn't worry about the compounded interest because the interest would stay the same. However, if she neglects to pay for even one month, additional interest would be carried out until it is paid.