Question

For an interest rate of 13 percent compounded annually, how much will be required in
four years to repay a $25,000 loan received now?

Answer 1

Principal, $P=\$25,000$

$Rate, r= 13\%$

$Time, t=4years$

$n=$ 1 compounded annually

Amount to be paid in four years (compounded annually) will be

$A=P(1+\frac{r}{n})^{nt}=25,000$ $(1+\frac{13}{100\times1})^{(1)(4)}$

$=25,000(1+0.13)^{4}=25,000(1.13)^{4}=\$40761.84$