Question

What is the total lifetime cost for a loan had a principal of $5,500, an interest rate of 7.5% compounded monthly, and a duration of ten years?

Answer 1

Answer: the total lifetime cost for the loan is $11616.4

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

A = P(1+r/n)^nt

Where

A = total cost of the loan at the end of t years.

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount borrowed.

From the information given,

P = $5,500

r = 7.5% = 7.5/100 = 0.075

n = 12 because it was compounded 12 times in a year.

t = 10 years

Therefore,

A = 5500(1 + 0.075/12)^12 × 10

A = 5500(1 + 0.00625)^120

A = 5500(1.00625)^120

A = $11616.4