Problema Solution
You borrow 10,000 at 13% interest. You do not have to make any payments for 5 years. The interest is compounded every month (12 times per year). How much do you owe after 5 years?
Answer provided by our tutors
formula for compounded interest:
T=p(1+r/n)^(nt)
where 'T' is the total amount accumulated [in this case, debt is being accumulated], 'p' is the principal amount, 'r' is the rate, 'n' is the number of interest periods (12, one per month) and 't' is the number of years
T = 10000(1+0.13/12)^(12*5) = 19088.565
After five years of no payments you will owe approximately $19,088.57