Question

An amount of $37,000 is borrowed for 8 years at 7.25% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid back?

Answer 1

`A = P(1 + r/n)^((nt))`

`A = 37000(1 + 7.25)^8`

Answer:

`\longrightarrow A = \boxed{\bold{794,023,420,332.60}}`

Answer 2

Answer: The total amount that must be paid back at the end of the 8-year period is $65,206.49

Explanation:

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

A = the amount to be paid back

P = the principal amount borrowed ($37,000 in this case)

r = the annual interest rate (7.25%)

n = the number of times the interest is compounded per year (once annually in this case)

t = the time period (8 years)

A = 37000*(1 + 0.0725/1)^(18)

A = 37000(1.0725)^8

A = 65,206.49