Question

Took out a loan for $6800 that charges an annual interest rate of 8.6% compounded daily (365 days per year). What is the amount owed after one year assuming no payments are made?

a) $7,340.80
b) $7,394.30
c) $7,450.10
d) $7,512.25

Answer 1

To calculate the amount owed after one year on a $6800 loan with an annual interest rate of 8.6% compounded daily, use the compound interest formula. Plugging in the values, the amount owed after one year is approximately $7344.04.

Step-by-step explanation:

To calculate the amount owed after one year, we can use the formula for compound interest:

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

Where:

• A is the amount owed after one year
• P is the principal amount (the initial loan amount)
• r is the annual interest rate (as a decimal)
• n is the number of times interest is compounded per year
• t is the number of years

Plugging in the values from the question:

• P = $6800
• r = 8.6% = 0.086 (as a decimal)
• n = 365 (compounded daily)
• t = 1 (one year)

We can calculate A using these values:

A = 6800(1 + 0.086/365)^(365*1) = $7344.0419

Rounding to the nearest cent, the amount owed after one year is $7344.04.