Walter took out a $6,000 loan for six years. He is being charged 6 percent interest, compounded annually. Calculate the total amount he will pay.

Question

supie · Answer

The number Walter owes is () by 1.06/year, so by the time 6 yrs is over Walter owes 1.06^6 times the amount he loaned.

The amount that will be paid is $$6,000×1.06^6 ≈ $8511.11$$

By the time the first year is up,  Walter owes the original loan amount along with 6% interest. So, the overall price is $$  6000 + 0.06×6000 = $6000×1.06$$

By the end of the following yr he will owe 1.06 () that amount, or

$$6000×1.06^2$$

The amount that is owed is multiplied by 1.06/year until Walter pays off the amount he owes.