Question

Lucy obtains a 1-year payday loan for $5000.00 at 12% interest compounded monthly. To get the loan, she

also pays an origination fee of $125.00. What is the total cost of the loan to Lucy? Enter your answer as a
dollar amount, such as: 1400.68.

Answer 1

$5759.12

Explanation:

$5759.12

At the end of the year, the compound interest on her loan is: $5000(1+0.1212)12=$5000(1.01)12≈$5634.12. To pay off the loan at the end of the year, she pays 5634.12+125=$5759.12.