Question

Rufus took out a 2 year loan for 1500 at an electronics store to be paid back with monthly at a 14.4 APR compounded monthly if the loan offers no payments for the first 4 months how much will Rufus owe when he begins making payment?

Answer 1

Answer: $1573.31

Explanation:

Answer 2

$1573.31

Explanation:

We have been given that an electronics store to be paid back with monthly at a 14.4 APR compounded monthly.

As Rufus will begin to make payments after 4 months, so we will find the total amount after 4 months using compound interest formula.

`A=P(1+(r)/(n))^(nT)`, where,

A = Final amount after T years,

P = Principal amount,

r = Interest rate in decimal form,

n = Number of times interest in compounded per year,

T = Time in years.

Let us convert given interest rate in decimal form.

`14.4\%=(14.4)/(100)=0.144`

`4\text{ months}=(4)/(12)\text{ year}`

Upon substituting our given values in compound interest formula we will get,

`A=1500(1+(0.144)/(12))^{12* (4)/(12)}`

`A=1500(1+0.012)^(4)`

`A=1500(1.012)^(4)`

`A=1500* 1.048870932736`

`A=1573.306399104\approx 1573.31`

Therefore, Rufus will owe $1573.31 when he begins making payment.