by Juanita

(USA)

You are required to calculate the amount of interest obtained by monthly compounding. The formula used for finding compound interest is:

Here,

The rate of interest is 6% per year. Before you begin the calculations, you need to express 6% as an equivalent decimal number. This can be achieved by dividing 6 by 100.

Since the interest is compounded monthly, you can take n as 12. As no time period has been specified, we shall assume that the loan is taken for a period of one year. Now that all the variable values are known, you can directly substitute them in the formula and get the result.

We have determined the loan amount after 1 year by monthly compounding as about