Question

maxine took out a loan for $3200 at 8% interest, compounded annually. if she makes yearly payments of $250, will she ever pay off the loan?

Answer 1

Answer: No, because $250 is less than the amount of interest she is charged per year.

Step-by-step explanation:

Answer 2

Solution:

As per the problem

Maxine took out a loan for $3200 at 8% interest, compounded annually.

she makes yearly payments of $250.

she will be able to Payoff her loan iff yearly payments made is greater than yearly interest.

Interest payable in first year $=3200(1+0.08)-3200=3200*1.08-3200$

Interest payable in first year$=3456-3200=256$

This payable interest will goes on increasing year on year.

Hence Maxine will never payoff the loan.