Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments. The interest paid in the first year is: $_________.

Question

Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments. The interest paid in the first year is: $_________.
(Please calculate the arithmetic solution and show your work)

Henry · Accepted Answer

Pt = Po*(1+r)^n. r = 11%/100% = 0.11 = APR expressed as a decimal. n = 1 comp./yr * 1yr = 1 compounding period. Pt = $10500*(1.11)^1 = $11655. I = Pt-Po = 11,655-10,500 = $1155.00.

Allison Anderson · Answer

Correct