Question

A college student takes out a $7,500 loan from a bank. What will the balance of the loan be after one year (assuming the student has not made any payments yet) if the bank charges 5.3% interest each year?

Answer 1

Answer: $7897.50

Explanation:

Loan taken = $7500

t = 1 year

r = 5.3 % or 0.053

= P [ 1 + r ] ^t

= 7500 [ 1 + 0.053] ^ 1

= 7500 [1.053]

= 7897.50