Question

Suppose that a loan of $5500 is given at an interest rate of 13% compounded each year.

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

Answer 1

11,990

9% of 5500 is 495

(495+5500) [one year] x 2 [two years] = $11,990

At the end of 2 years, Aldo will owe $11,990.

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