Question

a parent borrows $14,000 today at 5% interest compounded annually to buy a used car for their 16 year old. two years later the student receives a graduation gift of $3,000 and pays this gift toward the loan balance. approximately how much money will the parents still owe after that $3,000 payment?

Answer 1

Answer:$12,435

Step-by-step explanation:

Principle=$14000

Rate=5% per annum compounded annually

n=2 yrs

A=P [1+(R%/100)]^2

14000 [(1+5/100)]^2

14000 (21/20)^2

14000 (21/20 * 21/20)

140 (21/2*21/2) {zeros get cancelled}

(140*441)/4

15435

Graduation gift=$3000

=15435-3000

=$12435