Question

You borrow S25000 at 12.25% interest compounded monthly. If you are
unable to make any payments the first year, how much do you owe, excluding
penalties?

Answer 1

Answer:

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Answer 2

Given,

Total amount borrowed = $25000

Rate of compound interest compounded monthly = 12.25%

To Find,

Total borrowed amount after 1 year =?

Solution,

From the formula of compound interest, we know,

$CI = P (1 + r / n)^{nt}$

Where P = 25000, r = 12.25 , n = 12(There are 12 months) , t = 1 Year

$CI = 25000 (1 + 12.25 / 100*12)^{12*1}\\CI = 25000 (1 + 0.0102)^{12}\\CI = 25000 (1.01)^{12}\\CI = 25000 * 1.13\\CI = 28240$

Hence, after 1 year, I will owe $28240 excluding penalties.