Exp.Introduction to College Mathematics - CHALLENGE 2: Loans, Interest, and Investments.pdf

4/19/22, 8 : 08 PM Introduction to College Mathematics - CHALLENGE 2: Loans, Interest, and Investments
UNIT 4 — CHALLENGE 2: Loans, Interest, and Investments
2 — Compound Interest
Solve interest and value real world word problems using compound interest.
Tiffany borrows $8,000 to pay for college. The loan has a 7% interest rate that compounds monthly. She plans to pay off the loan in 15 years.
How much will she pay in total?
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A.)
$15,002.31
B.)
$22,791.57
C.)
$19,283.29
D.)
$18,309.87
B.)Correct.
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To find the answer, use the formula for compound interest.
First, convert the interest rate to a decimal.
Place the numbers into the compound interest formula.
Follow the order of operations (PEMDAS) to calculate the total, beginning with the parenthesis.
Next, calculate the exponent.
Solution.
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Unit 4 Tutorials
Compound Interest
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what's covered
In this lesson, we will continue to explore interest by looking at compound interest. You will continue strengthening your results driven skill as you solve problems involving
compound interest. Specifically, we will discuss:
1. Simple Interest vs. Compound Interest
2. Calculating Compound Interest
1. Simple Interest vs. Compound Interest
As we discussed in our last lesson, there are two different types of interest: simple interest and compound interest. Simple interest is, well, simple to figure out with a simple
formula of:
formula
Simple Interest
Simple interest assumes that the interest amount toward a loan or investment is not added back into the principal. Additionally, the time is calculated in years.