Question

the pinkman company borrowed $20,000 at an interest rate of 8% to purchase some equipment and will make annual payments on the loan. if the term of the loan is 4 years, what is the total amount of interest that the company will pay on the loan? use time value of money factors with at least four decimal places and then round your final answer to the nearest whole dollar.

Answer 1

The Pinkman Company will pay a total of $5,132 in interest on the $20,000 loan over 4 years with an 8% interest rate.

Step-by-step explanation:

To calculate the total amount of interest that the Pinkman Company will pay on the $20,000 loan, we need to use the formula for compound interest. The formula is:

`Compound Interest = Principal × (1 + Interest Rate) ^ Time - Principal`

In this case, the Principal is $20,000, the Interest Rate is 8%, and the Time is 4 years.

Plugging in these values, we get:

Compound Interest =
`20,000 * (1 + 0.08) ^ 4 - 20,000`

Simplifying the equation, we calculate that the total amount of interest the company will pay is $5,132.