Question

Total amount = P (1 + i)t

Ryan has an eight–year loan for $6,000. He is being charged an interest rate of 5 percent, compounded annually. Calculate the total amount that he will pay

Answer 1

Let
T = 'total amount'
P = 'principal / loan amount' = 6000
i = interest rate = 5% per year = 0.05
t = time period in years = 8 years

Then,
T = P(1+i)^t = 6000 x (1+0.05)^8 = 6000 x 1.05^8 = 8864.63

So the total amount that Ryan will pay is $8,864.63.