Question

1. Margo borrows $1600, agreeing to pay it back with 8% annual interest after 10 months. How much interest will she pay?

Round your answer to the nearest cent, if necessary.

2. You deposit $400 each month into an account earning 4% interest compounded monthly.

a) How much will you have in the account in 15 years?

$

b) How much total money will you put into the account?

$

c) How much total interest will you earn?

$

Answer 1

Answer:

1.

Given,

p = 1600

r = 8%

= 8/100

= 0.08

t = 10 months

= 10/12 year

Consider,

Interest = Principal*Interest rate*Time

substitute vaues

= 1600*0.08*10/12

= 106.67

So she must pay interest amount $106.67

2.

Given,

p = 400

r = 4% = 0.04

n = 12

t = 15 yrs

a)

FV = p(((1+(r/n))^nt - 1) / (r/n))

substitute values

= 400(((1+(0.04/12)^(12*15)) - 1) / (0.04/12))

= $98436.2

b)

Now number of periods

m = nt

= 12*15

= 180

Monthly payment = 400

Total amount deposited = 400*180

= $72000

c)

Total interest earned = $98436.2 - $72000

= $26436.2