Question

An amount of $45,000 is borrowed for 5 years at 4% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paidback?Use the calculator provided and round your answer to the nearest dollar.

Answer 1

Concept:

The formula to calculate the compound interest is given below as

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{Where,} \\ A=\text{amount} \\ P=\text{amount borrowed}=45,000 \\ r=\text{rate}=(4)/(100)=0.04 \\ t=\text{time(years)} \\ n=nu\text{mber of times compounded}=1 \end{gathered}`

By substituting the values, we will have

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ A=45,000(1+(0.04)/(1))^(1*5) \\ A=45,000(1+0.04)^5 \end{gathered}`

By simplifying the expression above, we will have

`\begin{gathered} A=45,000(1+0.04)^5 \\ A=45,000*1.04^5 \\ A=54,749 \end{gathered}`

Hence,

The final answer is = $54,749