Question

Taylor planes to borrow $4500 from the bank to purchased a used vehicle. If he borrows the money at a rate of 4% interest for 2 years, what is the total amount he will have to pay back to the bank?

Answer 1

Taylor will accrue $360 in interest on a $4500 loan at a 4% interest rate over 2 years, making the total amount to be repaid $4860.

Step-by-step explanation:

To determine the total amount Taylor will have to pay back to the bank for a $4500 loan at a 4% interest rate over 2 years, we need to calculate the simple interest accrued over that period and add it to the principal amount.

The formula for simple interest is:

I = PRT

Where:

I is interest,

P is the principal amount ($4500),

R is the annual interest rate (4% or 0.04),

T is the time in years (2 years).

Plugging the values into the formula:

I = $4500 × 0.04 × 2

I = $360

Taylor will accrue $360 in interest over the 2 years. Therefore, the total amount to be paid back to the bank is:

Total = Principal + Interest

Total = $4500 + $360

Total = $4860

Taylor will have to pay back a total of $4860 to the bank after 2 years.

Answer 2

The Amount which will be pay back to bank in 2 years is $4867.2

Step-by-step explanation:

Given as :

The principal borrow from account = $4500

The rate of interest applied = 4 %

The Time period of loan = 2 years

Let The amount pay back to the bank = A

From Compounded method

Amount = Principal ×
`(1+(Rate)/(100))^(Time)`

Or, Amount = $4500 ×
`(1+(4)/(100))^(2)`

Or, Amount = $4500 × ( 1.04 )²

So, Amount = $4500 × 1.0816

∴ Amount = $4867.2

Hence The Amount which will be pay back to bank in 2 years is $4867.2 Answer