Question

An amount of $18,000 is borrowed for 13 years at 4% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be

paid back?
Use the calculator provided and round your answer to the nearest dollar

Answer 1

Total amount to be paid back = $29971

Explanation:

Formula used to calculate the final amount of the loan to be paid,

Total amount to be paid =
`P(1+(r)/(n))^(nt)`

Where P = Principal amount of loan taken

r = rate of interest

n = Number of compounding in a year

t = duration of investment

By substituting the values in the formula,

Total amount to be paid after loan maturity =
`18000(1+(0.04)/(1))^(13* 1)`

=
`18000(1.04)^(13)`

= 18000(1.66507)

= $29971.32

≈ $29971

Total amount to be paid after loan maturity will be $29971.