Question

Jack tool out a 6-year loan for $25,000 to purchase a boat at a 4.5% interest rate. If the interest is compounded monthly, what will he have paid total over the course of the loan?

Answer 1

A = $32,732.58

A = P + I where

P (principal) = $25,000.00

I (interest) = $7,732.58

Explanation:

Given data

Time= 6 years

Principal= $25,000

Rate= 4.5%

First, convert R as a percent to r as a decimal

r = R/100

r = 4.5/100

r = 0.045 rate per year,

Then solve the equation for A

A = P(1 + r/n)^nt

A = 25,000.00(1 + 0.045/12)^(12)(6)

A = 25,000.00(1 + 0.00375)^(72)

A = $32,732.58