Question

10. Marney just opened her own hair salon and needs to repay a loan from her local bank. She borrowed

$35,000 at an annual interest rate of 3.9% compounded quarterly. They will allow her to operate her salon
for 15 months without making a payment. How much will Marney owe at the end of this 15-month
period?

Answer 1

The loan amount is $35,000. Marney will operate her salon for 15 months without making a payment. During this period, the interest will accumulate on the loan.

To simplify the calculation, let's assume that the interest is compounded annually, rather than quarterly. This approximation will make the calculation easier.

At an annual interest rate of 3.9%, the interest accumulated over 15 months can be estimated as:
Interest = Principal * Interest rate = $35,000 * 0.039 = $1,365.

Therefore, at the end of the 15-month period, Marney would owe the original loan amount of $35,000 plus the accumulated interest of $1,365, resulting in a total of approximately $36,365.