Question

(2) Olena loans her sister Irini $8,000. The loan is to be repaid at a nominal interest rate of 4.8% payable monthly. The monthly payments are to be for $ 100 except for a final smaller payment. How much does Irini owe Olena at the end of one year

Answer 1

Answer: $8,392.56

The total amount Irini owed Olena is $8,392.56

Step-by-step explanation:

By using compound interest to solve the question

A=p (1+ r/n) *nt (raised to power nt)

A= future amount to be returned (unknown)

P= principal (present value) =$8,000

r = 4.8% = 0.048

t = 1year

n = 12 payments in a year ( the rate compounded monthly)

A= 8000 {1 + (0.048/12)} * 12

A = 8000 ( 1+0.004) *12

A = 8000 (1.004) *12

A = $8,392.56 as the amount to owed.

Nt: * 12 means raised to the power of 12.