(1)
It took her 9 more months but Marina has managed to save thefull $725 plus more to cover fees to pay off the pay-day loancompany. However, she forgot to account for the interest that hadbeen compounding over time. Consider it is now 275 days later, theremaining loan was $725 and the APR is 47% compoundeddaily.
What is the total amount that Marina must now pay in order topay off her the loan, accounting for interest?
What is the total amount of interest paid (not includingfees)?
(2)
Tony is saving up to go traveling after graduation. How muchwill he have if he can put $100 at the beginning of every month,for the full four years he is in school, into his high-interestsavings account which earns 1.95% interest?
How much interest will be earned?
(3)
Anna also wants to travel after graduation but she isn’t workingwhile in school so she won’t be able to put money aside regularly.However, her grandmother gave her the generous gift of $2500 forher birthday and suggested she invest it in a GIC because it’s lowrisk. She shopped around and found a 4 year GIC investment thatearns 2.8% interest annually.
How much will Anna have at the end of her four yearinvestment?
How much interest will be earned?
How much interest will be earned due to compounding*?
*calculate simple interest using the simple interest formula,then compare to the total interest earned to discover the impact ofcompounding the interest