Question

What is the interest earned and amount due on a principal of $1080 at an interest of 4.1%/year for 60 months? Round the answer to the nearest cent.

Answer 1

This is exponential gain... different stuff than the simple % increase or discount

Answer 2

oh

Answer 3

can you do it?

Answer 4

I'm not even sure I understand it, at least as written. Usually, if you have principal invested, it pays interest ("interest earned"). Or, a loan like a car loan is 60 months at some rate, and you have to make payments that include payments on principal and payments of interest (but you don't "earn" interest on a loan)

Answer 5

I assume you just copied the problem... any idea what they meant?

Answer 6

yeah i copied it

Answer 7

i can show you the answers

Answer 8

You also need to know whether you are paying once at the end of 60 months or paying annually or paying monthly.

Answer 9

thats what i don't understand

Answer 10

oh its at the end of each year

Answer 11

is it a loan?

At the end of a year, if you borrowed $1080 at 4.1%, you would owe 0.041 * 1080 in interest for year 1, plus you would owe 1/5 of the principal back (since you would be making 5 payments over the loan, one at the end of each year).

Answer 12

here i'll skip this one and see what it says later

Answer 13

If the interest was totaled up at the end of the year, and if you paid that interest, then nothing compounds into year 2... at the end of year 2, calculate 0.041 * (1080 - (1/5)1080)... pay the interest for year 2 plus (1/5) of the original 1080.

Answer 14

skipping = good choice :)

Answer 15

LOL

Answer 16

Compound interest examples:
http://math.about.com/library/weekly/aa042002a.htm

Answer 17

However, the way this one was written, it might NOT be compounding... if you pay the interest as you go, nothing compounds.

Answer 18

I need to run... sorry to bail out. Good luck reviewing and on the test :)

Answer 19

the answer for this one is $221.40; $1301.40

Answer 20

that is basically (0.041 x 1080) + 1080

So, it means, interest at 4.1% on the full 1080, plus the original 1080.

Interest is 221.40, total due is the full loan plus 1 year of interest = 1301.40

Answer 21

makes sense, just hard (at least for me) to get that interpretation from the problem

Ok, now I gotta go :) Good luck again.

Answer 22

thanks for all the help!!!!!!!!!!!!!!!!!