Question

Jared borrowed $4000 a year ago at an annual interest rate of 7.9%, compounded quarterly. The loan was to be paid off in four years, but he wants to pay it off now. How much should his creditor expect as a payout of the loan?

Answer 1

$5469.65

Explanation:

Jackson borrowed $4000

Interest= 7.9%= 0.079

N=4

m= "compounded quartely"= 4

If he wants to pay it off now, the amount his creditor expect as a payout of the loan is:

Future Value= X(1+i/m)^nm

FV= 4000(1+0.079/4)^4*4

FV= 4000(1+0.01975)^16

FV= 4000(1.01975)^16

FV= 4000(1.3674121)

FV= 5469.6484

FV= $5469.65

The amount his creditor expect as a payout of the loan is 5469.65 if jared want to pay off the loan now.