Question

You are borrowing money today at 9.2 percent, compounded annually. You will repay the principal plus all the interest in one lump sum of $12,682 two years from today. How much are you borrowing?

Answer 1

Principal(P) = $10,635(Approx)

Step-by-step explanation:

Given:

Amount borrowed plus interest (A) = $12,682

Interest rate (r) = 9.2%

Number of years (n) = 2

Find:

Principal(P)

Computation:

`P=(A)/((1+r)^n) \\\\P=(12,682)/((1+0.092)^2) \\\\P=(12,682)/((1.092)^2) \\\\P=(12,682)/((1.192462) \\\\P=10,635.1397`

Principal(P) = $10,635(Approx)