A college student takes out a $7,500 loan from a bank. What will the balance of the loan be after one year (assuming the student has not made any payments yet) if the bank charges 3.8% interest each year?

Answer 1

To find the balance of the loan after one year, you can calculate the interest on the initial loan amount and then add it to the principal.

1. Principal amount (P): $7,500
2. Interest rate (r): 3.8% (expressed as a decimal, this is 0.038)
3. Time (t): 1 year

The formula to calculate the total balance after interest is:

$$\text{Total Balance}=P+(P\times r\times t)$$

Now, substitute the values into the formula:

$$\text{Total Balance}=7500+(7500\times 0.038\times 1)$$

Calculating the interest:

$$7500\times 0.038=285$$

So, the total balance after one year will be:

$$\text{Total Balance}=7500+285=7785$$

Thus, the balance of the loan after one year will be $7,785.