86.5k views
2 votes
A demand loan for ​$ 10795.14with interest at4.2 ​% compounded

is repaid after ​7years, 11months. What is the amount of interest​
paid?

User Fukanchik
by
8.1k points

1 Answer

6 votes

Final answer:

The amount of interest paid on the loan after 7 years and 11 months is calculated using the compound interest formula A = P(1 + r/n)^(nt), with P being the principal, r the annual interest rate, n the number of times interest is compounded per year, and t the time in years.

Step-by-step explanation:

To calculate the amount of interest paid on a demand loan of ​$10795.14 with an interest rate of 4.2% compounded annually, we need to use the formula for compound interest. The formula is A = P(1 + r/n)^(nt), where:

  • P is the principal amount (initial loan), which is $10795.14,
  • r is the annual interest rate (in decimal), so 4.2% becomes 0.042,
  • n is the number of times that interest is compounded per unit t, and
  • t is the time the money is invested for, which in this case is 7 years and 11 months (or 7.917 years).

We assume the interest is compounded once a year (n = 1). Therefore, the total amount A after 7.917 years can be calculated as:

A = 10795.14(1 + 0.042/1)^(1 * 7.917)

After solving this, we'll get the total amount A. The interest paid is then A minus the initial principal of $10795.14. We can now find the exact amount of interest paid.

User Staeff
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.