Question

jenny borrowed $500 for 5 years at 4% interest compounded annually. what is the total amount she will have paid when she pays off the loan?

Answer 1

Use the formula for compound interest,


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

Where P is the starting amount (500$), r is the rate of interest (0.04), n is the number of times the interest is compounded per unit (1 per year), and t is the amount of time it is compounded (5 years).

Now, plug it into the formula:


`A=500(1+ (0.04)/(1))^(5)`

Do the math, and your answer is she must pay 608.32$ when she pays her debts.