Question

If $4000 is borrowed at a rate of 16% interest

per year, compounded quarterly, find the
amount due at the end of
(a) 4 years
(b) 6 years
(c) 8 years

Answer 1

(a) $7492

(b) $10,253

(c) $14,032

Explanation:

As we know, the final Amount can be calculated with the formula for compound interest,

A = P(1 + \frac{r}{n} )^{nt}

where,

A = Final Amount due

P = Initial principal amount borrowed

r = rate of interest in decimal

n = number of times applied per time period

t = total time period

Now, according to the given data,

(a) in 4 years ;-

⇒
`A = 4000(1 + (0.16)/(4) )^(4(4))`

⇒
`A = 7492`

(b) in 6 years ;-

⇒
`A = 4000(1 + (0.16)/(4) )^(4(6))`

⇒
`A = 10,253`

(c) in 8 years ;-

⇒
`A = 4000(1 + (0.16)/(4) )^(4(8))`

⇒
`A = 14,032`