Question

Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5% compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) $12,489.06 $13,372.12 $12,615.21 $13,245.97

Answer 1

$12,615.21

Step-by-step explanation:

In this question, first we have to compute the future value which is shown below:

Future value = Present value × (1 + (rate ÷ total number of days in a year)) ^ Total number of days in a year

= $12,000 × (1 + ( 0.05 ÷ 365 days)) ^ 365

= $12,000 × ( 1 + 0.00013698630 ) ^ 365

= $12,000 × (1.000136986 ) ^ 365

= $12,000 × 1.051267496

= 12615.20996