A balance, A, owed on a loan after t years can be modeled using the equation A=P(1+(r/n)^nt, where P is the initital balance on the line of credit, r is the interest rate, and n is the number of times per year that the interest is compounded. Assuming that there are no monthly payments or additional spending, what is the difference between the amount owed to the back after 3 years if the interest is compounded monthly versus quarterly for $1200 with a 9.3% interest rate?

Question

A balance, A, owed on a loan after t years can be modeled using the equation A=P(1+(r/n)^nt, where  P is the initital balance on the line of credit, r is the interest rate, and n is the number of times per year that the interest is compounded. Assuming that there are no monthly payments or additional spending, what is the difference between the amount owed to the back after 3 years if the interest is compounded monthly versus quarterly for $1200 with a 9.3% interest rate?

anonymous · Answer

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