Question

I need help

An amount of $16,000 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

$28009.05

Explanation:

Let us use the formula A = P(1 + r/n)^(nt)

Step 1: Convert 7.25 to decimal

`7.25\% = 0.0725` in decimal form

• Step 1: Percent means 'per 100'. So, 7.25% means 7.25 per 100 or simply 7.25 over 100.
• 
  `7.25 / 100\\\\= (7.25)/(100)\\\\= 0.0725`
• If you divide 7.25 by 100, you'll get 0.0725 (a decimal number).

Step 2: Solve with the formula

`A = 16000(1 + 0.0725)^8\\\\A= 28009.05`

• Step 1: Add the numbers:
  `1+0.0725=1.0725`
• 
  `=16000\cdot \:1.0725^8`
• 
  `=16000\cdot \:1.75056`
• Step2: Multiply
• 
  `=28009.05068`