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A college student takes out a $7,500 loan from a bank. What will the balance of the loan be after one year (assuming the student has not made any payments yet):

please explain how you got the answer.

A college student takes out a $7,500 loan from a bank. What will the balance of the-example-1
User Jay Souper
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1 Answer

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The general equation use to calculate increasing or decreasing values

P(t) = A(1 + r)^t

where:
P = New value
A = original or starting amount
r = rate (can be either increasing(+) or decreasing(-))
t = time period that increase/decrease take place.

So after 1 year at 3.8% interest
P = 7500(1 + 0.038)^1
P = 7500(1.038)
P = 7,785

Then after 1 year at 5.35 interest
P = 7500(1 + 0.053)^1
P = 7500(1.054)
P = 7,897.50
User Rodrigo Dias
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