Question

Walter took out a $6,000 loan for six years. He is being charged 6 percent interest, compounded annually. Calculate the total amount he will pay.

Answer 1

Answer:

  $8511.11

Step-by-step explanation:

Each year, the amount Walter owes is multiplied by 1.06, so at the end of 6 years, Walter owes 1.06^6 times the amount he borrowed.

  he will pay $6,000×1.06^6 ≈ $8511.11

_____

At the end of the first year, Walter owes the original loan amount plus 6% interest. That total is ...

  $6000 + 0.06×6000 = $6000×1.06

At the end of the following year, he owes 1.06 times that amount, or ...

  6000×1.06²

The amount owed is multiplied by 1.06 each year until Walter pays off the loan.