Following an encounter with an Imperial Star Destroyer, Han Solo is forced to du

Question

Following an encounter with an Imperial Star Destroyer, Han Solo is forced to dump his contraband before being boarded, costing Jabba the Hut 16,000 Galactic Credits. Jabba the Hut immediately demands repayment with 85% interest per Coruscant Solar Cycle. (Round all answers for questions 1-4 where appropriate to the nearest Galactic Credit.)

1. Assuming Han is unable to pay Jabba back until 3 Solar Cycles have passed, and Jabba uses simple interest, Han must pay back [fill in answer] Galactic Credits.

2. Assuming Han is unable to pay Jabba back until 3 Solar Cycles have passed, and Jabba compounds the interest at the end of each year, Han must pay back [fill in answer] Galactic Credits.

3. There are 10 months in a Coruscant Solar Year. Assuming Han is unable to pay Jabba back until 3 Solar Cycles have passed, and Jabba compounds the interest monthly, Han must pay back [fill in answer] Galactic Credits.

4. There are 368 days in a Coruscant Solar Year. Assuming Han is unable to pay Jabba back until 3 Solar Cycles have passed, and Jabba compounds the interest daily, Han must pay back [fill in answer] Galactic Credits.

5. Assuming Han is unable to pay Jabba back until 3 Solar Cycles have passed, and Jabba compounds the interest continuously, Han must pay back [fill in answer] Galactic Credits.

Explanation / Answer

16000 credit with 85% interest per Coruscant Solar cycle;
1) For simple interest a yearly amount of 85% adds on as interest.
So total amount to be repaird = 16000+ 3* 0.85*16000 = 56,800

2) For compounded interest at the end of each year, the final sum turns out to be
A = P * (1+r)n = 16000 * (1+0.85)3 = 6.331625 * 16000 = 101306

3) For monthly compounded interest, the final sum turns out to be
A = P * (1+r)n where n = 3*12=36 and r = 0.85/12= 0.0708 = 7.08%
A = 16000 * (1+0.0708) 36 =11.7354 * 16000 ~ 187767

4)  For daily compounded interest, the final sum turns out to be
A = P * (1+r)n where n = 3*368=1104 and r = 0.85/368= 0.002309 = 0.2309%
A = 16000 * (1+0.002309) 1104 =12.7585 * 16000 ~ = 204136

5) For continuous compounding
A = P ert where r= 0.85 and t=3 years;
A = 16000* e0.85*3 = 16000*12.8071= 204913.6


Note: As you can see, with the frequency of compounding increasing, the total amount that Han must pay back is increasing too.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.