Question
If you borrow $759 for eight years at an interest rate of 9% compounded annually, how much interest will you pay
Answers
GPT 3.5
The formula to calculate the total amount paid when borrowing money at compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = total amount paid (principal + interest)
P = principal amount borrowed ($759)
r = interest rate per period (9% or 0.09)
n = number of compounding periods per year (1, since it is compounded annually)
t = number of years (8)
Plugging in the values:
A = 759(1 + 0.09/1)^(1*8)
A = 759(1.09)^8
A = 759(2.158924389)
A = $1639.97
To find the amount of interest paid, subtract the principal amount borrowed from the total amount paid:
Interest = Total amount paid - Principal
Interest = $1639.97 - $759
Interest = $880.97
Therefore, you will pay $880.97 in interest over the 8-year period.
A = P(1 + r/n)^(nt)
Where:
A = total amount paid (principal + interest)
P = principal amount borrowed ($759)
r = interest rate per period (9% or 0.09)
n = number of compounding periods per year (1, since it is compounded annually)
t = number of years (8)
Plugging in the values:
A = 759(1 + 0.09/1)^(1*8)
A = 759(1.09)^8
A = 759(2.158924389)
A = $1639.97
To find the amount of interest paid, subtract the principal amount borrowed from the total amount paid:
Interest = Total amount paid - Principal
Interest = $1639.97 - $759
Interest = $880.97
Therefore, you will pay $880.97 in interest over the 8-year period.