Question

A construction company just paid off a loan that it received 5 years earlier. If the total amount of money the construction company paid was $2,600,000 & the interest rate (i) on the loan was 7.2%, how much money did the company borrow 5 years ago?

Answer 1

The construction company borrowed $2,000,000 5 years ago.

Step-by-step explanation:

To find out how much money the construction company borrowed 5 years ago, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the total amount paid off, P is the principal amount borrowed, r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years. In this case, A is $2,600,000, r is 7.2%, n is 1 (since interest is compounded annually), and t is 5 years.

Plugging in the values, we get: $2,600,000 = P(1 + 0.072/1)^(1*5). Solving this equation for P, we find that the construction company borrowed $2,000,000 5 years ago.