Question

A college student borrows $10,000 today at 10% interest compounded annually. Four years later, the student makes the first repayment of $3000. Approximately how much money will the student still owe on the loan after the first payment?

1.$7700
2.$8300
3.$11,000
4.$11,700

Answer 1

To find the remaining balance on the loan after the first payment, we need to calculate the annual interest and subtract the repayment amount from the initial loan amount.

Step-by-step explanation:

To find the amount of money the student will still owe on the loan after the first payment, we need to calculate the remaining balance.

First, let's calculate the annual interest for 4 years using the formula:

Interest = Principal imes Rate imes Time

Interest = $10,000 imes 0.10 imes 4 = $4,000

Next, subtract the first repayment of $3000 from the initial loan amount to find the remaining balance:

Remaining balance = $10,000 + $4,000 - $3,000 = $11,000

Therefore, the student will still owe approximately $11,000 on the loan after the first payment.