At the END of 6 1/2 years you owe $3,622.10. You were charged 4% (SA).
At the END of 6 1/2 years you owe $3,622.10. You were charged 4% (SA).
A. What is the interest per conversion / compounding period?
B. How many total conversion / compounding periods?
C. What is the amount originally borrowed?
Homework Answers
Solution:
A. Interest rate per semi annual (SA) period = 4%/2 = 2%
B. Total compounding periods = 6.5 years * 2 = 13 periods
C. Amount originally borrowed = Future value / (1+i)^n
= $3,622.10 / (1.02)^13 = $2,800
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At the END of 6 1/2 years you owe $3,622.10. You were charged 4% (SA).
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