Question

Ivan took out a loan for 6700 that charges an annual rate of 9.5% compounded quarterly. Answer each part.

Answer 1

We will have the following:

a) The amount after one year will be:

`\begin{gathered} A=6700(1+(0.095)/(4))^(4\ast1)\Rightarrow A=7359.53647... \\ \\ \Rightarrow A\approx7359.54 \end{gathered}`

So, the amount after 1 year will be approximately $7359.54.

b) The effective annual interest rate will be:

`eair=(1+(0.095)/(4))^4-1\Rightarrow eair=0.0984382791...`

So, the effective annual interest rate will be approximately 9.84%.