Veronica borrowed $5,000 from her Uncle and the agreed upon interest rate is 4%
ID: 1098090 • Letter: V
Question
Veronica borrowed $5,000 from her Uncle and the agreed upon interest rate is 4% annually (EAR)? a What would be the result at the end of five years If she pays her uncle $100 a month? b If each month she pays the interest (only) on the loan, how much would this be? Please show formuals used in excel and do not reply if you are not confident about the answer. Thanks! Veronica borrowed $5,000 from her Uncle and the agreed upon interest rate is 4% annually (EAR)? a What would be the result at the end of five years If she pays her uncle $100 a month? b If each month she pays the interest (only) on the loan, how much would this be?Explanation / Answer
A) Total amount after five years with interest is A = P(1+R%/100)^n
so here P=5000, R%=4 , n=5
A = 5000(1+4/100)^5 =5000* (104/100)^5 = 6083.264 $
And she is paying 100$ per month so total amount paid at the end of 5 year is
T= 12*100*5=6000 $
She has to pay another A-T = 83.264 $
B) By the end of first month she pays interest on loan she will be having only loan amount to pay by that time and same applies after 2nd month also . So by paying interest she need to pay only principle amount that is 5000 $ at the end of 5 years.
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