If a loan for $10,000 is paid off in 5 years and the rate of interest is n% per annum componded monthly, how much is paid as interest over the course of the loan?
The reference gives loan repayment calculators for both simple and compound interest. In the situation of compound interest, the interest amount for the first month is added to the principal on which interest is due for the second month, and so on.
For the simple interest calculator, insert 10,000.00 as the loan amount, 60 months for the time period, and 10% for the interest rate.
For the compound interest calculator, insert the same figures.
Results are as follows:
Simple Interest = $2,748.20
Compound Interest = $6,105.10
Note: The amount you calculate will not necessarily match the amount calculated by the bank. This is because the bank usually posts added fees such as administration fees.
check Approved by eNotes Editorial