Question

Suppose you borrow money for 6 months. If the interest rate is compounded monthly, the formula

A=p(1+r/12)^6
gives the total amount A to be repaid at the end of 6 months. For a loan of P=$1000 and interest rate of 9%, how much money will you need to pay off the loan?

Answer 1

$1045.85.

Explanation:

A=p(1+r/12)^6

Here r = 0.09, P = $1000 so

Amount of money needed to pay off the loan =

1000(1 + 0.09/12)^6

= $1045.85.