Many scenarios given to you when learning about the compound interest formula include whole years. Life doesn't always work in nice whole numbers! How would we handle a situation where we wanted to calculate a balance after 19 months or 27 months?
Scenario: Kira takes a $12,000 loan that has a 5 year term at 4.25% compounded daily. The terms of the loan state that she can make no payments for 6 months. After reading the fine print, Kira notices that interest will continue to accumulate during this 6 month grace period that will be rolled over into her loan balance.
1. If the compound interest formula is written in years, what value should you use for t to represent 6 months?
2. What will Kira's loan balance be after 6 months?
3. How much interest will be accumulated during this 6 month grace period?
