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Math Help - compound interest.

  1. #1
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    compound interest.

    Hi! Can you please help me with this problem? Thank you in advance!!!


    Dave has a student loan of $10,000 on January 1, 2000. The loan has an interest rate of 9% per year compounded monthly. Instead of paying off the loan, Dave places a bundle of money in his sock drawer. After 5 years he removes all the money and pays of the loan.

    The bank recommended that Dave pay the bank $207.59 a month to pay off the loan in 5 years. How much money does Dave lose each month by adopting his sock option plan?
    Last edited by mr fantastic; June 17th 2010 at 09:29 PM. Reason: Removed the useless 'PLEASE HELP' in post title.
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  2. #2
    MHF Contributor
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    Interest (no payments made) : 10000(1.0075)^60 - 10000

    Interest (payments made) : 207.59 * 60 - 10000

    Difference is what Dave lost over the 60 months.
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