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Joanie takes a $6000 loan to pay for her car. The annual interest rate on the loan is 12%. She makes no payments for 4 years, but has to pay back all the money she owes at the end of 4 years. How much more money will she owe if the interest compounds quarterly than if the interest compounds annually? Express your answer as a dollar value to the nearest cent.

 Jun 22, 2020
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N=4; R=0.12;PV=6000; FV=PV*(1 + R)^N; print"FV =$",FV
FV =$ 9441.12 - Annual compounding

 

N=4*4; R=0.12/4;PV=6000; FV=PV*(1 + R)^N; print"FV =$",FV
FV =$ 9628.24 - Quarterly compounding

 

$9628.24  -  $9441.12 = $187.12 - Extra interest that she will pay if compounded quarterly

 Jun 22, 2020

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