Answer to Question #245349 in Civil and Environmental Engineering for K31

Question

A loan company charges 15% simple interest on P500 loan. How much will be repaid if the loan is paid back in one lump sum after 3 years?

Answer 1

Repaid loan can be applied in many types of financial transactions, such as funding a retirement account or college savings account. Assume that an individual invests $500 in a three-year certificate of deposit account that pays;

$15\%$ interest at the end of each year (in this case 12/31). Any interest earned during the year will be retained until the end of the $3 \space year$ period and will also earn 10% interest annually.

so the lump sum after three years will be $1725.