Question

Background Info: Tom finds a second personal loan option. This loan would also require him to repay the principal in one lump sum after three years.

Loan Option B

Principal: $9,000

Type of Interest: Compound Interest

Interest Rate: 8%

Rate of Accrual: Once per year

Use the formula for annual compound interest.

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

Remember, A refers to the total amount owed.

Calculate the total amount that Tom would repay.

$10,337
$11,337
$12,337
$13,337

Answer 1

The total amount that Tom would pay is

B) $11,337

Answer 2

The total Amount that Tom would pay is B.$11337

Step-by-step explanation

The formula for annual compound interest is ;

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

A=total amount owed

P=principal, $9000

r=rate

t=3years

A=9000(1+8/100)^3

A=$11337