Question

Business Applications. Find the future value (compound amount) or the compound

interest, as indicated. Round answers to the nearest cent. Use a calculator or Table 16-1 to find FVF. Please put the entire solution for each question. Thank you

16. Brent Davis thinks that he needs to borrow $6,600 for 2.5 years. He doesn’t have a very good credit rating, so most finance companies want to charge him a high interest rate. He finally finds a lender that will loan him the money at 9% compounded monthly. How much interest will Brent have to pay to this particular lender?

18. Samuel Tang wants to borrow money from his father to buy a car. Samuel’s father is trying to teach him how to manage money, so he agrees to loan him the money, but at 5% compounded quarterly. Samuel borrows $11,200 and repays everything—principal plus all of the interest—in 3 1/2 years. How much does Samuel pay back to his father?

20. Marcia Juarez and her brother-in-law have a successful business with several employees. They decide to borrow $12,000 to pay their next quarterly deposits for payroll tax and federal income tax. They get the money at 6% compounded monthly and repay all interest and principal after 3 months. How much do they repay?

Answer 1

Answer 16

Amount borrowed (present value)= 6600

Rate per month (I)= APR/12

=9%/12=0.0075

Total month in 2.5 years (n)= 2.5*12 = 30

Compound interest formula = PV*((1+I)^n) - 1)

=6600*(((1+0.0075)^30)-1)

=1658.393641

So ínterest paid to lender is $1658.39

Answer 18

Amount borrowed (present value)= 11200

Rate per quarter (I)= APR/4

=5%/4= 0.0125

Total quarter in 3.5 years (n)= 3 5*4 = 14

Amount paid back or Future Value formula = PV*(1+I)^n

=11200*(1+0.0125)^14

=13327.49318

So amount paid back is 13327.49

Answer 20

Borrowed Amount (present value)= 12000

Number of month (n)= 3

Rate per month (I)= 6%/12= 0.005

Amount paid back or Future Value formula = PV*(1+I)^n

=12000*(1+0.005)^3

=12180.9015

So amount paid back is 12180.90

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