Final answer:
To calculate the amount owed after 6 years on a $6200 loan at a rate of 4% compounded monthly, the compound interest formula is used. The calculation results in Erica owing approximately $7863.09 at the end of the 6-year period.
Step-by-step explanation:
To find the amount Erica owes at the end of 6 years for a $6200 loan at a rate of 4% compounded monthly, we use the compound interest formula:
P = P0(1 + r/n)nt
Where:
- P is the future value of the investment/loan, including interest.
- P0 is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested or borrowed for, in years.
Plugging the values into the formula:
P = 6200(1 + 0.04/12)6*12
Calculating the values:
P = 6200(1 + 0.0033333)72
P ≈ 6200 * 1.268241
P ≈ $7863.09
Therefore, Erica owes approximately $7863.09 at the end of 6 years.