Question

A business owner receives a $5,000 loan with 13% interest, charged at the end of each year. If he makes no payments on the loan at all, what will be the balance after 2 years?

Answer 1

The balance after 2 years for a $5,000 loan with 13% interest will be $6,300.

Step-by-step explanation:

To calculate the balance after 2 years for a $5,000 loan with 13% interest, we can use the formula for calculating simple interest:

Simple Interest = Principal × Interest Rate × Time

Plugging in the values, we have:

Principal = $5,000

Interest Rate = 13% = 0.13

Time = 2 years

Substituting these values into the formula, we get:

Simple Interest = $5,000 × 0.13 × 2 = $1,300

Therefore, the balance after 2 years will be the original loan amount plus the simple interest:

Balance = $5,000 + $1,300 = $6,300