Question

Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. the interest paid in the third year is ________.

Answer 1

To find the interest paid in the third year, we first calculate the equal annual installment. Then, we find the interest paid in each year based on the remaining loan amount. Finally, we determine that the interest paid in the third year is $135.

Step-by-step explanation:

To find the interest paid in the third year, we need to first calculate the equal annual installment. Since the loan is to be repaid in three equal annual installments, each installment would be $4,500 divided by 3, which is $1,500.

Next, we calculate the interest paid in the first year. The interest would be 9% of the remaining loan amount, which is $4,500. So, the interest paid in the first year is $4,500 x 0.09 = $405.

Similarly, in the second year, the remaining loan amount is $4,500 - $1,500 = $3,000. The interest would be 9% of $3,000, which is $270.

Finally, in the third year, the remaining loan amount is $3,000 - $1,500 = $1,500. Therefore, the interest paid in the third year would be 9% of $1,500, which is $135.

Answer 2

Amount borrowed = 4500 dollars The amount after 3 years compounded annully, A = P(1+r)^n Therefore, the amount = 4500*(1.09)^3 = 5827.6 Therefore, the compound interest =... Download This Solution