Question

Suppose that a loan of $8000 is given at an interest rate of 13% compounded each year.

Assume that no payments are made on the loan.
Follow the instructions below. Do not do any rounding.
(a) Find the amount owed at the end of 1 year.
si
(b) Find the amount owed at the end of 2 years.

Answer 1

9040

10215.20

Explanation:

compound interest that compounds yearly works as follows

PV(1+i)^n

just plug in the numbers

8000(1.13)^1= 9040

8000(1.13)^2=10215.20