calculate the final loan amount of 500 credit card loans with a 16% compound interest rate compound monthly for a 1 year term
To calculate the final loan amount, we can use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the final loan amount
P = the principal loan amount
r = the annual interest rate (in decimal form)
n = the number of times interest is compounded per year
t = the number of years
Given:
P = 500
r = 16% = 0.16 (as decimal form)
n = 12 (compounded monthly)
t = 1 year
Substituting the values into the formula:
A = 500(1 + 0.16/12)^(12*1)
Calculating inside the brackets:
A = 500(1.0133333333333333)^(12*1)
Calculating the exponents:
A = 500(1.0133333333333333)^12
Using a calculator:
A ≈ 538.62
The final loan amount for a 1-year term with a 16% compound interest rate compounded monthly on a $500 credit card loan is approximately $538.62.