The final value of an investment or loan with compound interest is given by:
[tex]FV=P(1+\frac{r}{m})^{m\cdot t}[/tex]Where P is the initial value (principal or loan), r is the annual interest rate, t is the duration of the investment/loan, and m is the number of compounding periods per year.
The following values are given in the problem:
P = $6000 - $500 = $5500
r = 8.3% = 0.083
t = 2 years
m = 365
Applying the formula:
[tex]FV=5500(1+\frac{0.083}{365})^{365\cdot2}[/tex]Calculating:
[tex]FV=5500(1+0.0002273926)^{730}[/tex]FV = $6493.03
The total amount paid back is $6493.03
This is equivalent to an approximate monthly payment of:
[tex]R=\frac{$ 6493.03 $}{24}=270.54[/tex]The monthly payment is approximately $270.54
