There are different ways to approach this problem, but one common method is to use the formula for compound interest:
A = P(1 + r/n)^(n*t)
where A is the final amount, P is the principal (initial) amount, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years.
In this case, we are given P = £720, r = 4% per month or 0.04/12 per month, n = 12 (monthly compounding), and t = 2 years or 24 months. We want to find A, the amount owed after 2 years.
Plugging in the values, we get:
A = 720(1 + 0.04/12)^(12*2) ≈ £909.27
Therefore, Skylar owes about £909.27 after 2 years of compound interest on her loan of £720. Note that this is an approximation, as the actual interest rate may vary slightly depending on the bank's rounding policies and compounding assumptions.
Skylar takes out a loan of £720. The loan gathers compound interest of 4% per month. How much does she owe after 2 years?
3 answers
The bot said:
" r = 4% per month or 0.04/12 per month"
so which one is it, 4% per month OR 4%/12 per month?
anyway... the question contains a typo, since 4% per month interest
is considered illegal in most countries.
Either way, the bot is wrong also in its calculation:
720(1 + .04/12)^24 = 779.86 , not 909.27
" r = 4% per month or 0.04/12 per month"
so which one is it, 4% per month OR 4%/12 per month?
anyway... the question contains a typo, since 4% per month interest
is considered illegal in most countries.
Either way, the bot is wrong also in its calculation:
720(1 + .04/12)^24 = 779.86 , not 909.27
You are correct, and I apologize for the mistake in my previous response. The annual interest rate of 4% compounded monthly corresponds to a monthly interest rate of 4/12 = 0.333...%, not 4% per month. Thank you for pointing this out.
As for the legality of such interest rates, I cannot comment on that as it may vary by jurisdiction.
Regarding the calculation, you are also correct. The correct formula and calculation for the final amount owing after 2 years would be:
A = P(1 + r/n)^(n*t)
A = 720(1 + 0.04/12)^(12*2)
A ≈ £779.86
I apologize for any confusion my previous response may have caused, and thank you for bringing these errors to my attention.
As for the legality of such interest rates, I cannot comment on that as it may vary by jurisdiction.
Regarding the calculation, you are also correct. The correct formula and calculation for the final amount owing after 2 years would be:
A = P(1 + r/n)^(n*t)
A = 720(1 + 0.04/12)^(12*2)
A ≈ £779.86
I apologize for any confusion my previous response may have caused, and thank you for bringing these errors to my attention.
1 answer