Question

Kendrick will pay interest at a monthly rate of 0.7% on a student loan of $6000 for the next 2 years, at which point he will begin making payments. The total number of dollars he will owe in 2 years is 6000(1.007)24. Rewriting the expression 6000(1.007)24 in which of these ways would be useful in calculating the rate of interest he will pay each year?

Answer 1

The ways that would be useful in calculating the rate of interest he will pay each year is:  6000(1.007)^12×2

Rate of interest

Using this formula

Rate of interest=Principal(1+Rate)^nt

Where:

Principal=$6,000

Rate=0.7%

Time=2 years

Number of months =12 months

Let plug in the formula

Rate of interest=6000(1+.007)^12×2

Rate of interest=6000(1.007)^24

Rate of interest=$7,093.47

Therefore the ways that would be useful in calculating the rate of interest he will pay each year is:  6000(1.007)^12×2

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