How much interest is owed on this debt? (I am math retarded!) :-)?

Question

I loaned someone 9000.00 cash that was due in full on Jan. 1, 2005. If it is not payed back in full balance (no payments have been made, in fact) and the contract states that the remaining balance (9000.00) is subject to a 20% monthly interest rate beginning on Jan. 1, 2005, how much money is owed on Jan. 1, 2008?
Like I said, it has never been paid on, and the 20% monthly interest rate is on the original 9000.00 owed.
I have found a few different websites online that claim to show how to do the problem, but I have come up with numbers raging from 16,000 and some change to upwards of 500,000!! Please help! Thank you so much!

Answer 1

9000 x 20% = 162000000 x 24months = 9388depending on if that is 16.20 if it is 162.00 it is 12,088 i would take the higher amount and persue a civil court where you can sue them for the balance

Answer 2

It's much easier to compute if it's simple interest and not compounded interest. You state that the interest is on the original principal of 9k, which would be $1,800 monthly. Simply multiply that by the number of months the debt is outstanding and add to the principal. Counting this month, that would be 36 months x $1,800 = $62,800 plus the 9k, or $71,800.

If the interest is compounded, that means the first month's interest would be $1,800, but the second month's interest would be 20% of $10,800, and the following month's, 20% of $10,800 plus the previous month's interest, and so on. It's very possible that at a rate of 20% per month (a rate which doubles the original principal in less than 5 months) that the total outstanding debt after three years could be almost a million dollars.

This should help to illustrate the dangers of compounding in credit card debt and the benefits of compounding in investing.

Answer 3

if 9000 dollars is lent with a monthly rate of 20% which would be componded 12 times a year for three years thats 36 times. 9000(1+0.2)^36.= $6,379,216.88 man lets just say your rich hehehe

Answer 4

to find the interest i think you have to find the percent interest for 9000. So 9000 times 0.2=1,800. 9000+1800=10,800 so the total amount for one month is 10,800. Now you multiply 10,800 by 0.2 to find the percent interest for the second month, then you add that amount to the 10800, which is 12,960. So on. sorry if this doesn't help much!

Answer 5

I'm sorry lol but I'm math-retarded too.

Answer 6

math.com