Question

Suppose that a loan of $4500 is given at an interest rate of 9% compounded each year.

Assume that no payments are made on the loan. Do not do any rounding.
(a) Find the amount owed at the end of 1 year.
5
(b) Find the amount owed at the end of 2 years.

Answer 1

$ 4,905. $ 5,346.45

Explanation:

Amount accrued & owed after a year

= $4,500(1 + 9/100 ×1)

= $ 4,905.

Amount accrued & owed after two years=

= $ 4,905(1+9/100×1)

= $ 5,346.45.