Question

Charmaine is buying a new car. Her bank offers her a loan of $20,000 with a 6.25% annual interest rate compounded quarterly, or every 3 months. Which of the following equations could model the bank’s offer? Select all that apply.

Answer 1

`{A = 20000(1 + (0.0625)/(4))^(4t)}`

Explanation:

The question asks us to find an expression for compound interest for the given scenario.

To do this, we have to use the following formula for compound interest:

`\boxed{A = P(1 + (r)/(n))^(nt)}`

where:

• A ⇒ final amount

• P ⇒ principal amount = $20,000

• r ⇒ interest rate (decimal) =
`(6.25)/(100)` = 0.0625

• n ⇒ number of times interest is compounded per year = 4

• t ⇒ time in years

Therefore, if we substitute the data above into the formula, we can find the required expression:

`{A = 20000(1 + (0.0625)/(4))^(4t)}`