Question

An amount of $30,000 is borrowed for 6 years at 5% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid

back?
Use the calculator provided and round your answer to the nearest dollar.

Answer 1

We can use the formula for compound interest to calculate the amount that must be paid back:

A = P (1 + r/n)^(n*t)

where:

P = principal amount = $30,000

r = annual interest rate = 5% = 0.05

n = number of times compounded per year = 1 (annual)

t = time period = 6 years

Substituting these values into the formula, we get:

A = 30,000 (1 + 0.05/1)^(1*6) = 30,000 (1.05)^6

Using a calculator, we get:

A ≈ $40,447.78

Therefore, the amount that must be paid back is approximately $40,447.

Explanation:

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