Question

Compound interest
Plz help!!!

Answer 1

a)
`A(t) = 17500(1.0053)^(12t)`

b) The balance after 8 years will be of $29,069.

Explanation:

Compound interest:

The compound interest formula is given by:

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

Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.

a)

Loan of $17,500 means that
`P = 17500`

6.4% interest rate means that
`r = 0.064`

Compounded monthly means that
`n = 12`. So

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

`A(t) = 17500(1 + (0.064)/(12))^(12t)`

`A(t) = 17500(1.0053)^(12t)`

b)

This is A(8). Then

`A(8) = 17500(1.0053)^(12*8) = 29069`

The balance after 8 years will be of $29,069.