Question

A demand loan for $10,088.75 with interest at 7.1% compounded annually is repaid after 4 years, 8 months. What the amount of interest paid? The amount of interest is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer 1

To calculate the amount of interest paid on the loan, use the compound interest formula with the given parameters, then subtract the principal from the total amount after 4 years and 8 months to find the interest paid, rounding to the nearest cent.

Step-by-step explanation:

To calculate the amount of interest paid on a demand loan of $10,088.75 with an interest rate of 7.1% compounded annually after 4 years and 8 months, we will need to use the formula for compound interest: A = P(1 + r/n)^(nt).

Where:

First, we calculate the total amount paid after the loan period:

A = 10088.75 * (1 + 0.071/1)^(1*4.67) = 10088.75 * (1.071)^4.67

After calculating the compound amount, we subtract the principal from this total to determine the interest paid:

Interest = A - P

Rounding the final answer to the nearest cent, we will get the exact amount of interest paid over the 4 years and 8 months.