Question

$35,000 is borrowed for 8 years at 3.1% p.a.

a. Calculate the amount to be repaid if the interest is compounded quarterly.



b. Calculate the amount of interest paid.​

Answer 1

Amount $44,808.24; Interest $9,808.24

Step-by-step explanation:

The formula for calculating compound interest is as follows

FV = PV × (1+r)^n

in this case ,

Fv = future value

Pv = 35,000,

r = 3.1 % ,

n = 8years

Interest is compounded 4 time per year.

r will be 3.1% divided by 4 and n = 8 multiplied by 4

Fv = $35,000 x (1 + 3.1%/4 ) ^ 32

Fv = $35,000 x ( 1+ 0.0075) ^ 32

Fv = $35,000 x 1.280

Fv= $44,808.24

Interest paid will be amount after 8 year minus the principal

= $44,808.24- $35,000

=$9,808.24