Question

Bastian takes out a $3,500 personal loan with 5.6% fixed annual interest compounded monthly to pay for a welding certification program. He repays the loan in one year.How much total interest does Bastian pay on his loan?

Answer 1

Given:

Principal, P=$3500

Rate is 5.6%

That is, r=0.056

Year, t=1 year

To find the total interest under compounded monthly:

Using the compounded monthly formula,

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ A=3500(1+\frac{0.056}{12})^{12(1)} \\ =3500(1+0.00467)^{12} \\ =3500(1.00467)^{12} \\ =3701.11 \end{gathered}$

Then, the total interest is,

3701.11-3500=201.11

Therefore, the total interest is $201.11