To calculate the total interest Mary would pay at 4% interest compounded continuously, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the amount of money accumulated after n years, including interest
P = the principal amount (initial loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is borrowed for
In this case, P = $12,000, r = 0.04, n = ∞ (compounded continuously), and t = 6 years.
A = 12000(1 + 0.04/∞)^(∞*6)
A = 12000 * (1 + 0.04)^6
A = 12000 * (1.04)^6
A ≈ 14802.91
Total interest paid = A - P
Total interest paid = 14802.91 - 12000
Total interest paid ≈ $2802.91
Therefore, Mary would pay approximately $2802.91 in total interest if she borrows $12,000 at 4% interest compounded continuously for 6 years.
Mary needs to borrow $ 12,000. She can borrow the money at 4.5% simple interest for 6 yr or she can borrow at 4% with interest compounded continuously for 6уг.
How much total interest would Mary pay at 4% interest compounded continuously?
1 answer