Question

You owe 12% interest each year on a $500 loan. If you make no payments and take no additional loans, what will the loan balance be after 5 years? Write an expression to represent the balance and evaluate it to find the answer in dollars.

Answer 1

$800

Explanation:

Interest on the loan is calculated using the formula ...

I = Prt . . . . interest on principal P at rate r for t years

I = $500×0.12×5 = $300

The balance is the sum of the principal and interest:

B = P +I

B = $500 +300 = $800

The balance due after 5 years is $800.