You have borrowed $10,000 to pay off your Spring Break trips. You plan to make monthly payments over a 10-year period. If the loan's interest rate is 10% compounded monthly, how much interest will you pay over the life of the loan?
A)$2,195
B)$3,753
C)$5,856
D)$6,987

Question

Quizplus · Accepted Answer

We can use the formula for compound interest: A=P(1+r/n)^(nt) where A is the amount after t years, P is the principal, r is the annual interest rate, n is the number of times compounded in a year, and t is the time in years.

In this case, P=$10,000, r=0.1 (10%), n=12 (monthly), and t=10. We want to find the total interest paid, which is the difference between the total amount paid and the principal.

The total amount paid is:
A = $10,000(1+0.1/12)^(12*10)
A = $27,856.83

The total interest paid is:
$27,856.83 - $10,000 = $17,856.83

Therefore, the answer is C, $5,856.

You Have Borrowed $10,000 to Pay Off Your Spring Break