Option (C) is the correct expression that gives the unpaid balance on loan for compounded monthly.
What is compound interest?
Compound interest is the interest you earn on interest. Compound interest is the interest calculated on the principal and the interest accumulated over the previous period.
For the given situation,
Principal value, p = $60000
Rate of interest, r = 8.4% = 0.084
Monthly payment, pm = $516.90
Number of years, T = 7 years
Compounded monthly, n= 12
The formula of unpaid balance on loan is
[tex]B=p(1+\frac{r}{n} )^{nT} + pm(\frac{1-(1+\frac{r}{n} )^{nT} }{\frac{r}{n} } )[/tex]
On substituting the above values,
⇒ [tex]B=60000(1+\frac{0.084}{(12)} )^{(12)(7)} + 516.90(\frac{1-(1+\frac{0.084}{12} )^{(12)(7)} }{\frac{0.084}{12} } )[/tex]
⇒ [tex]B=60000(1+0.007 )^{84} + 516.90(\frac{1-(1+0.007 )^{84} }{0.007} )[/tex]
Hence we can conclude that option (C) is the correct expression that gives the unpaid balance on loan for compounded monthly.
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