Answer: $ 34143.356
Explanation:
Solution
Compound interest A = P ( 1 + i )^ 9
Where i is the rate
Future value of the loan after 9 months
P = 33000, i = 4.55/100 = 0.0455÷12
n = 9
Substitute the values into the above formular
A = 33000 ( 1 + 0.0455/12)^9
A = $ 34143.356
Answer:
The principal when he begins repaying the loan will be $34,143.45¢
Explanation:
To calculate what the principal amount will be by the time he commences repayment of his loan (nine months later), we would attempt using the compound interest formula. The formula for calculating compound interest:-
Fv = Pv × [1 + (r/n)]^(n×t)
Where Fv = future value
Pv = present value
r = rate of interest
n = number of times of compounding in a year.
With respect to the question:
Pv = 33,000
r = 4.55% = 0.0455
t = 9 months = 3/4 years/0.75years.
n = 12 (since compounding is monthly)
Substituting appropriately:-
Fv = 33,000 × [1 + (0.0455/12)]^(12×0.75)
Fv = 33,000 × (1 + 0.003792)^9
Fv = 33,000 × [(1.003792)^9]
Fv = 33,000 × 1.03465
Fv = $34,143.45¢(new principal)
The interest that would have accrued during that period is $34,143.45 - $33,000 = $1,143.45¢.
Since this interest will be added to the initial amount Warren borrowed, then the resulting principal by the time he begins repayment of the loan after deferring it for nine months will be $34,143.45¢
