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14 March, 00:23

What is the total lifetime cost for a loan had a principal of $5,500, an interest rate of 7.5% compounded monthly, and a duration of ten years?

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  1. 14 March, 00:52
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    Answer: the total lifetime cost for the loan is $11616.4

    Step-by-step explanation:

    We would apply the formula for determining compound interest which is expressed as

    A = P (1+r/n) ^nt

    Where

    A = total cost of the loan at the end of t years.

    r represents the interest rate.

    n represents the periodic interval at which it was compounded.

    P represents the principal or initial amount borrowed.

    From the information given,

    P = $5,500

    r = 7.5% = 7.5/100 = 0.075

    n = 12 because it was compounded 12 times in a year.

    t = 10 years

    Therefore,

    A = 5500 (1 + 0.075/12) ^12 * 10

    A = 5500 (1 + 0.00625) ^120

    A = 5500 (1.00625) ^120

    A = $11616.4
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