Martha buys a house for 240000 but had to borrow the money t

Martha buys a house for $240,000 but had to borrow the money through a bank. Instead of making regularly fixed payments, she is going to pay the entire amount of the loan off 3 years later when she expects to acquire a large amount of money through her stock options. The bank that loaned her the money is charging her 5.5% interest compounded quarterly. What will Martha have to pay the bank 3 years from now in order to pay off the loan? Preview

Solution

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

A=amount needed to be paid

r=5.5% =0.055

n=4(compounded 4 times in year)

t =3 years

P=amount borrowed =240000

A=240000(1+(0.055/4))^4*3

A=282736.35

martha has to pay 282736.35$