Mervin's loan of $300 is an illustration of compound interest
The interest to pay back in 5 months is $74.2, and the amount to pay back in 5 months is $374.2
<h3>The interest to pay back in 5 months</h3>
The given parameters are:
- Principal, P =$300.00
- Rate, r = 70%
- Time, t = 5 months
The compound interest is calculated as:
CI = P * (1 + r)^(t/12) - P
Substitute known values
CI = 300 * (1 + (0.70))^(5/12) - 300
Evaluate the expression
CI = 74.2
Hence, the interest to pay back in 5 months is $74.2
<h3>The amount to pay back in 5 months</h3>
The amount (A) is calculated using:
A = CI + P
This gives
A = 74.2 + 300
A = 374.2
Hence, the amount to pay back in 5 months is $374.2
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