Answer:
Interest: $402.20
Total Debt owed: $9,302.00
Step 1: Multiply the principal (the original amount borrowed) by the interest rate (%):
$8,300 x 4% = 360.00 (interest for one year)
Step 2: Find out how many years she will be paying back the loan and add that number of years to the first payment year ($360). ($360 + 5years = 365 total payments) Then multiply the total number of payments by the interest rate ($365 x .04 = $14.60 interest per payment).
Step 3: Add up all the yearly interests ($14.60 per payment x 12 months = $181.20 yearly interest)
Step 4: Add the yearly interest to the total debt owed.
$9,302 + $181.20 = $9,483.20 total debt
Total amount owing after 5 years = $8,300+($365 x .04 interest rate per payment for 60 months)=10,605.00 dollars owed in 5 years of payments. Interest owed is 10,605 x .04=$410.20 for a grand total of 10,915.20 dollars owed overall for this 4% loan which was paid back over a period of five years with twelve monthly payments per year at four percent interest rate per month ($410.20/12=$34.02).
