Question

You borrowed $11,250 from the bank to buy a used car. You will pay the bank back in 5 years with 3.45% interest compounded annually. How much interest will you end up paying? Question 5 options: $1,940.63 $13,190.63 $13,329.23 $2,079.23

Answer 1

(D)$2079.23

Explanation:

If I borrowed $11,250 from the bank to buy a used car. You will pay the bank back in 5 years with 3.45% interest compounded annually, then:

Principal=$11,250

Time=5 years

Rate=3.45%

Since it is compounded annually, our compound interest will be derived using this formula:

Interest=Amount at the end of 5 years - Principal

where:

Amount,
`A=P(1+r)^n`

`=11250(1+0.0345)^5\\=11250(1.0345)^5\\=13329.23`

Therefore our Interest=13329.23-11250 =$2079.23