anonymous
  • anonymous
Two thousand dollars is borrowed for one year at an interest rate of 1.1% per month. If the same amount of money can be borrowed at an interest rate of 13.2% per year, how much could be saved in interest charges?
Economics - Financial Markets
chestercat
  • chestercat
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anonymous
  • anonymous
with a monthly compounding interest of 1.1%, total at the end of year will be $2,280.572, Interest Amount = $280.572 with a simple interest of 13.2% per year, total at the end of year will be $2,264.00 Interest Amount = $264.00 Thus, interest diff. = money that could be saved = $16.572. Calculation details: Manual method, I used excel to do below: Month Amount Rate 1 2000 1.011 2 2022 1.011 3 2044.242 1.011 4 2066.729 1.011 5 2089.463 1.011 6 2112.447 1.011 7 2135.684 1.011 8 2159.176 1.011 9 2182.927 1.011 10 2206.939 1.011 11 2231.216 1.011 12 2255.759 1.011 13 2280.572 You can also use the equation at http://www.calculatorsoup.com/calculators/financial/compound-interest-calculator.php to get at same numbers. Hope this helps. Feel free to revert if you need further explanations!

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