Question

An amount of $27,000 is borrowed for 11 years at 4.25% Interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid back?Use the calculator provided and round your answer to the nearest dollar.

Answer 1

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Answer 2

`A=\text{ \$42,678}`

Explanation:

Compound interest is represented by the following equation:

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{where,} \\ P=\text{ principal} \\ r=\text{ rate} \\ n=\text{ number of times compounded per time ''t''} \\ t=\text{ time in years} \end{gathered}`

Then, if an amount of $27,000 is borrowed for 11 years at a 4.25% interest, compounded annually:

P=27,000

r=0.0425

n=1

t=11

`\begin{gathered} A=27,000(1+(0.0425)/(1))^(11) \\ A=\text{ \$42,6}77.6 \\ \text{ Rounding to the nearest dollar:} \\ A=\text{ \$42,678} \end{gathered}`