Question

If you borrow $1200 at 14% interest, compounded monthly, and pay off the loan at the end of

2 years, how much interest will you have paid? Answer rounded to the whole number asap

Answer 1

The first step is to convert the annual interest rate to a monthly rate. We divide 14% by 12 months to get a monthly interest rate of 1.17%.

Next, we need to calculate the total number of months for the loan. Since the loan is for 2 years, or 24 months, we will make 24 payments.

To calculate the interest paid, we can use the formula:

I = P[(1 + r)^n - 1]

where:

I = interest paid

P = principal (amount borrowed) = $1200

r = monthly interest rate = 0.0117

n = total number of compounding periods = 24

Plugging in these values, we get:

I = 1200[(1 + 0.0117)^24 - 1]

I = $357.72

Therefore, the interest paid is $358.

Hope This Helps!