Question

Charlton borrowed 59.000 from his bank. The loan will be compounded quarterly for 55 years at a 7.5% interest rate. Note: Use the formula FV = P(1+)

The full amount to the nearest whole cent) he will owe to the bank (principal + interest) is?

a $13,543.48
b $ 12,876.47
c $14,064.21
d $15,135.09
e none of them are correct​

Answer 1

The full amount he will owe to the bank=$3,513.41

Explanation:

The formula for the future value of the loan after 55 years, can be written as;

F.V=P.V(1+r/n)^nt

where;

F.V=future value of the loan

P.V=present value of the loan

r=annual interest rate

n=number of compounding periods per year

t=number of years

In our case;

P.V=59

r=7.5%=7.5/100=0.075

n=4

t=55 years

replacing;

F.V=59(1+0.075/4)^(4×55)

F.V=59(1.01875)^220

F.V=3,513.41

The full amount he will owe to the bank=$3,513.41