Question

Jim borrows $300 at 7% per annum compounded quarterly for 7 years. Determine the interest due on the loan.

Answer 1

`I=\text{ \$187.62}`

Explanation:

Compounded interest is represented as;

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{where,} \\ P=\text{ principal } \\ r=\text{ interest rate} \\ n=\text{ times compounded per unit time} \\ t=\text{ time in years} \end{gathered}`

Therefore, for a principal of $300 at 7% per annum compounded quarterly;

`\begin{gathered} A=300\cdot(1+(0.07)/(4))^(4\cdot7) \\ A=487.62 \\ \text{Then, the interest due would be the subtraction of A-P} \\ I=487.62-300 \\ I=\text{ \$187.62} \end{gathered}`