problem: compound interest problem 5
example: You take out a loan of $ 2 000,- for 8 months, interest rate 1% per month
question: How much you have to pay back after 8 months?
answer: compound interest problem 5
1. step: given/wanted
present value (pv) = € 2 000,-
interest rate per month (r) = 1%
number of periods (m) = 8 month
future value (fv) = loan including compound interest after 8 month?
2. step: calculate
future value = fv
present value = pv
r = annual rate
n = number of periods
fv = pv • (1 + r)n
fv = 2 000 • (1 + 0,01)8
fv = € 2 165,71
3. step: answer
After eight month you have to pay back € 2 165,71.