Question

Suppose you take out a 1000$ loan for tuition at UMASS on sep. 1st and the loan charges 9% interests. IN december, you win a scholarship with a 2000$ stipend and decide to pay off the loan on January 1st. How much do you need to pay back?
HELP PLEASE.

Answer 1

Is the 9% interest monthly? annually?

Answer 2

it doesn't say, which is why i'm bit confused on how to start this. :(

Answer 3

Well, you can probably assume that the interest rate is annually. But then again it depends on if they consider a part of a year to be worth a year or if they do increments...

I would say that you would have to pay 1090 back (1000 + (1000*0.09))

Answer 4

hm. okay thanks though! :)

Answer 5

sure thing :)

Answer 6

It seems like 9% is monthly interest, since it mentions the time from 1st sept. to 1st Jan!

Answer 7

really? So you would use the equation, A=p(1+r/k)^kt?

Answer 8

Yes, that's how I observe :)

Answer 9

Well if it's monthly interest, my above answer is wrong D:

Answer 10

@wombat we just trying to analyze the post! No guarantee right or wrong :P

Answer 11

Haha im playing pity party here :P

Answer 12

A = 1,000 ( 1 + .09/12 ) ^ (4/12) = $ 1,002.5

Answer 13

Can you continue?

Answer 14

so 1,002.5 is how much they owe?

Answer 15

The loan amount she owns!

Answer 16

okay. i see. thanks. one more quick question. how do you find out it if is annually, monthly, or continuosly by looking at the word problem?

Answer 17

If the question doesn't mention in detail about the time, then it's annually!
If it's continously, the question will name it out most of the time!

Answer 18

Almost all of loan type compounded monthly!

Answer 19

okay thanks! :D