Calculate the final loan amount of a $500 credit card loan with a 16% compound interest rate, compounded monthly, for a 1-year term
To calculate the final loan amount with compound interest, you can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = Final loan amount
P = Principal amount (initial loan amount)
r = Interest rate
n = Number of times interest is compounded per year
t = Number of years
Given:
Principal amount (P) = $500
Interest rate (r) = 16% = 0.16
Number of times interest is compounded per year (n) = 12 (monthly compounding)
Number of years (t) = 1
Plugging these values into the formula:
A = 500(1 + 0.16/12)^(12*1)
A = 500(1 + 0.013333)^12
A = 500(1.013333)^12
A = 500(1.172244)
A ≈ $586.12
Therefore, the final loan amount of a $500 credit card loan with a 16% compound interest rate, compounded monthly, for a 1-year term is approximately $586.12.