I already posted this question,and Henrey answered it. I just wanted to clarify a few things to make sure I am on the right track
Problem: Joanie takes a $6,000 loan to pay for her car. The annual interest reate on the loan is 12%. She makes no payments for 4 years, but has to pay back all the money she owes at the end of 4 years. How much more money will she owe if the interest compounds quarterly than if the interest compounds annually? Express your answer as a dollar value to the nearest cent.
•Math - Henry, Friday, November 21, 2014 at 7:22pm:
P1 = Po*(1+r)^n. Compounded annually.
r = 12%/100% = 0.12 = Annual % rate expressed as a decimal.
n = 1Comp./yr. * 4yrs. = 4 Compounding
periods.
P1 = 6,000*(1.12)^4 = $9441.12
P2 = Po*(1+r)^n. Compounded quarterly.
r = (12%/4)/100% = 0.03 = Quarterly %
rate.
n = 4Comp./yr. * 4yrs. = 16 Compounding
periods.
Plug the above values into the given Eq
and solve for P2.
P2-P1 =
Now do I just plug in $9441.12 into P2 = Po*(1+r)^n? Please help!
2 answers
P2 = 6,000 (1.03)^16
then find P2 -P1
= 6000(1.12)^4 = 9441.12
amount owing at 12% per annum compounded quarterly in 4 years
= 6000(1.03)^16 = 9628.24
Now subtract them as Henry told you to do.