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Suppose you borrow $500 and you plan to pay it back all at once in 5 years. You are charged 2% interest compounded monthly.

What is the total amount you will need to pay when the loan is due?

Respuesta :

imlittlestar

Answer:

The total amount you will need to pay when the loan is due $553

Step-by-step explanation:

Points to remember

Compound interest

A = P[1 +R/n]^nt

Where A - amount

P - principle amount

R = rate of interest

t -  number of years

n - number of times compounded yearly

To find the total amount charged

Here P = $500, R = 2%, n = 12 and t = 5

A = P[1 +R/n]^nt

  = 500[1 + 0.02/12]^12*5

 = 500 * 1.105

 = 552.54

≈ $553

Therefore the total amount you will need to pay when the loan is due $553

smmwaite

Answer:

=$552.54

Step-by-step explanation:

To find the total amount that would have accumulated we need to use the compound interest formula.

A=P(1+R/n)ⁿᵇ

where A is the amount, P is the principal R is the decimal  rate and n is the number of periods when the interest is compounded per unit time and b is the time.

A=500 (1+0.02/12)¹²ˣ⁵

  =500(1.0016)⁶⁰

=$552.54

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