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timurjin [86]
3 years ago
13

Milton took out a loan for S2400 at 7% interest compounded annually the makes yearly payments of $140, will he ever pay off the

loan?
A. Yes, because $140 is less than the amount of interest he is
charged per year.)
B. No, because $140 is greater than the amount of interest he is
charged per year.
C. Yes, because $140 is greater than the amount of interest he is
charged per year.
D. No, because $ 140 is less than the amount of interest he is
charged per year.​
Mathematics
1 answer:
labwork [276]3 years ago
6 0

Answer:

We will choose option D.

Step-by-step explanation:

Milton took out a loan for $2400 at 7% interest compounded annually.

So, after one year his loan will grow up to 2400(1 + \frac{7}{100} )^{1} = 2568 dollars.

Therefore, the interest added to the principal is $(2568 - 2400) = $168

But Milton makes yearly payment of $140 which is less than the interest i.e. $168 which is added to his loan in the first year.

Therefore, he can not ever pay off the loan.  

So, we will choose option D. (Answer)

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