Question

Chrystal borrowed $1,000,000 from MQ Bank for one year at simple interest rate of 9.9% p.a. Unfortunately, she misread the documentation for the loan, and has misunderstood the interest charge. In fact, MQ Bank will charge her interest (in a single payment at the end of the loan) at a rate of 9.9% p.a., compounded half-yearly. What additional amount will Chrystal have provide to repay the loan, due to this misunderstanding?

a. 0.00
b. 49500.00
c. 2450.25
d. 108801.00

Answer 1

Chrystal will have to provide an additional amount of $88,010.00 due to the misunderstanding.

Step-by-step explanation:

To calculate the amount Chrystal will have to repay due to the misunderstanding, we need to use the compound interest formula. The formula for compound interest is:

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

Where:

• A is the total amount
• P is the principal amount ($1,000,000)
• r is the annual interest rate (9.9% or 0.099)
• n is the number of times interest is compounded per year (2 in this case, since it's compounded half-yearly)
• t is the number of years (1 in this case)

Using this formula, we can calculate the total amount Chrystal will have to repay, which is $1,088,010.00. Therefore, the additional amount she will have to provide to repay the loan is $88,010.00.