Question

Margo borrows $1100, agreeing to pay it back with 5% annual interest after 13 months. How much interest willshe pay?Round your answer to the nearest cent, if necessary.

Answer 1

In this problem, we have an exponential growth function of the form

$y=a(1+r)^x$

where

a=$1,100

r=5%=0.05

substitute

$\begin{gathered} y=1,100(1+0.05)^x \\ y=1,100(1.05)^x \end{gathered}$

For 13 months

x=13/12 years

substitute

$\begin{gathered} y=1,100(1.05)^{(\frac{13}{12})} \\ y=1,159.71 \end{gathered}$

so

The interest is equal to

1,159.71-1,100=$59.71

the answer is $59.71