Question

Edgar accumulated $5,000 in loan debt. If the interest rate is 20% per year and he does not make any payments for 2 years, how much will he owe on this debt in 2 years for quarterly compounding? Round your answer to the nearest cent Do NOT round until you calculate the final answer.

Answer 1

Edgar

The amount he will owe on this debt in 2 years for quarterly compounding is:

= $7,387.28

Step-by-step explanation:

Accumulated loan debt = $5,000

Interest rate per year = 20%

Period of loan = 2 years

Interest compounding = quarterly

From an online financial calculator:

N (# of periods) 8

I/Y (Interest per year) 20

PV (Present Value) 5000

PMT (Periodic Payment) 0

Results

FV = $7,387.28

Total Interest $2,387.28