Question

If Rhett decides to capitalize the interest (which totals $2,371.50) from the time he receives the funds until he begins making payments in 4.5 years, how much total interest would he pay on this loan?

A) $2,371.50
B) $5,000
C) $10,000
D) $7,371.50"

Answer 1

To calculate the total amount of interest Rhett would pay on his loan after capitalizing for 4.5 years, we need the interest rate and the compounding frequency. Without this information, we can only confirm the minimum interest Rhett would pay is $2,371.50.

Step-by-step explanation:

If Rhett decides to capitalize the interest on his loan, the total interest he would pay at the end of 4.5 years would be the initial interest plus the interest accrued on that interest over the 4.5 years. However, the question does not provide an interest rate or specify whether the interest is compounded annually, monthly, daily, or with some other frequency.

Without this information, we cannot accurately calculate the additional interest that would accrue over the 4.5 years. Therefore, we can only confirm that he will pay at least the initial interest amount of $2,371.50, which corresponds to option A. To calculate the total interest payment after capitalization over 4.5 years, we would need the interest rate and the compounding frequency.