# Annual Compound Interest

• Mar 16th 2010, 03:02 PM
Annual Compound Interest
Mary borrows 3500 for 2 years at 6% annual compound interest.
She plans to repay the loan in two equal installments at the end of the first and second year.
How Much will mary have to repay at the end of each year to clear the loan
.

The problem thats getting me is the two equal installments, Does this mean it has to be the same ammount.
I tried that way adding the 12percent and getting 3920 then dividing it by two but I dont think thats right,

Any help?
• Mar 16th 2010, 03:13 PM
Quacky
3500

She gets 6% interest, so after one year, she will have:

$3500\times1.06=3710$

And after two years:

$3710\times1.06=3932.6$

So dividing this by two:

She'll have to pay 1966.3 twice.

I'm sure that you can cope with the rounding.
• Mar 16th 2010, 09:32 PM
Wilmer
That's not correct, Quacky; payment should be 1,909.03
Code:

Year      Payment  Interest    Balance   0                              3500.00   1      -1909.03    210.00    1800.97   2      -1909.03    108.06        .00
Zetta, were you not given the formula to calculate loan payments? (Wait)