Question

A borrower has a loan of $ 50,000.00 at 6 % compounded annually with 9 annual payments. Suppose the borrower paid off the loan after 5 years. Calculate the amount needed to pay off the loan.

Answer 1

We say that $16911.28 is compound interest of 50,000 for 5 year from now ,at 6% compound annually. The total amount needed to pay off the loan $66,911.28

Explanation:

Given that,

`P=50,000`

`r=6`%

`t=5` years

`A=?`

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

`A=50,000\left ( 1+(6)/(100) \right )^(5)`

`A=50,000\left ( 1+0.06 \right )^(5)`

`A=50,000\left ( 1.06 \right )^(5)`

`A=66911.28`

`CI = A-P` ( CI = compound interest)

`CI=66,911.28-50,000.00`

`CI=16,911.28`

Total amount needed to pay off loan=
`\left ( 50,000.00+16,911.28 \right )` = $66,911.28

Compound interest $16911.28