Question

Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5% compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term

Answer 1

$12,615.21

Step-by-step explanation:

we need to determine the future value of the loan:

future value = present value x (1 + interest rate)ⁿ

• present value = $12,000
• n = 365 days (compounded daily)
• interest rate = 5% / 365 days = 0.05/365 = 0.000136986

future value = $12,000 x (1 + 0.000136986)³⁶⁵ = $12,000 x 1.051267496 = $12,615.21