Question

Brian borrowed $8000 at a rate of 7.5%, compounded annually. Assuming he makes no payments, how much will he owe after 10 years? Round your answer to the nearest cent.

Answer 1

The formula for the amount A after a rate r compounded annually is applied over the value P for t years is:

`A=P(1+r)^t`

In this problem, we have:

P = 8000

r = 7.5% = 0.075

t = 10

So, using those values in the formula, we obtain:

`\begin{gathered} A=8000(1+0.075)^(10) \\ \\ A=8000(1.075)^(10) \\ \\ A\cong16488.25 \end{gathered}`

Therefore, rounded to the nearest cent, after 10 years he will owe $16,488.25.