Question

After losing your job, and needing cash fast, you decide to try

your hand at gambling. This turns out to be a terrible decision
on your part, as you lose more money and in fact end up owing
the casino. At an interest rate of 22% per year, how much will
you owe on a loan of $4000: a) After one year? b) After three
years?

Answer 1

Given:

The principal = $ 4000

The rate of interest = 22 %

To find the loan amount a) after 1 year and b) after 3 years.

Formula

Loan amount is

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

where,

A be the loan amount

P be the principal

r be the rate of interest and

t be the time.

Now,

a) Taking, P = 4000, r = 22, t = 1 we get,

`A = 4000 (1+(22)/(100) )^(1)`

or,
`A = 4880`

Again,

b) Taking, P = 4000, r = 22 and t = 4 w eget,

`A = 4000(1+(22)/(100))^(4)`

`or, A = 7263.39`

Hence,

a) The amount of loan after 1 year is $ 4880

and b) The amount of loan after 4 year is $ 7263.39.