Question

Beth will borrow $10,000 which earns 4% compound interest and she will repay that amount in 20 years. How much interest was earned on her loan?

Question 4 options:

$8,000


$21,911.23


$11,911.23


$18,000

Answer 1

`I=\$11,911.23`

Explanation:

we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the amount that she will repay

P is the amount borrowed

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=20\ years\\ P=\$10,000\\ r=0.04\\n=1`

substitute in the formula above

`A=10,000(1+(0.04)/(1))^(1*20)`

`A=10,000(1.04)^(20)`

`A=\$21,911.23`

Find out the interest

`I=A-P`

substitute the values

`I=\$21,911.23-\$10,000=\$11,911.23`