Question

What is the total amount that will be repaid if the loan described is paid in 2 years?

$1,245 loan; 5% interest rate

Answer 1

Given:

Principal value of loan = $1,245

Rate of interest = 5%

To find:

The total amount that will be repaid if the loan described is paid in 2 years.

Solution:

The formula for amount is

`A=P\left(1+(r)/(100)\right)^t`

Where, P is the principal, r is the rate of interest, t is the number of years.

Putting P=1245, r=5 and t=2, we get

`A=1245\left(1+(5)/(100)\right)^2`

`A=1245\left(1+0.05\right)^2`

`A=1245\left(1.05\right)^2`

On further simplification, we get

`A=1245(1.1025)`

`A=1372.6125`

`A\approx 1372.61`

Therefore, the total amount that will be repaid if the loan described is paid in 2 years is $1372.61.