Calculate the total amount of money you will pay on a 30 year loan if the principle was $100,000 which is compounded monthly, and the interest rate is 4%.
Hint
Use the compound interest equation to find total amount paid and use P = 100000, t = 30, n = 12, r = 0.04.
Answer
$331,350
Example 2
If a savings account starts at $500, the interest rate the bank pays you is 2%, and the savings is compounded daily, how much will you have in 5 years?
Hint
Use the compound interest equation to find total amount paid and use P = 500, t = 5, n = 365, r = 0.02.
Answer
$552.58
Example 3
How much will a $27,500 car loan cost in total if there is semi-annual compounding at 6% interest for 36 months?
Hint
This time, convert months to years before you plug everything in! (Semi-annual compounding is twice a year.)
Answer
$32826.44
Example 4
What is the present value of a car loan with 3 years of payments of $500, monthly compounding, and an interest rate of 5%?
Hint
Use the present value equation with R = 500, r = 0.05, n = 12, t = 5.
Answer
$22478
Example 5
You find out you have a rich great aunt and when you turn 18, you get an allowance! Or rather, an annuity. Calculate the present value of an annuity with monthly payments to you of $200, semi-annual compounding, for the next 5 years at an interest rate of 3%.
Hint
Use the present value equation with R = 200, r = 0.03, n = 2, t = 5.