Maxine took out a loan for $3200 at 8% interest, compounded annually. if she makes yearly payments of $250, will she ever pay off the loan?

Question

asked Jan 10, 2019 129k views

2 Answers

Rahul Kulhari · Answer 1 · 2019-01-17T02:27:15+0000

Solution:

As per the problem

Maxine took out a loan for $3200 at 8% interest, compounded annually.

she makes yearly payments of $250.

she will be able to Payoff her loan iff yearly payments made is greater than yearly interest.

Interest payable in first year
$=3200(1+0.08)-3200=3200*1.08-3200\\$

Interest payable in first year
=3456-3200=256

This payable interest will goes on increasing year on year.

Hence Maxine will never payoff the loan.