Question

Mark borrowed $200 at 12% compound interest for two years. If he makes no payments. How much interest will he owe at the end of the second year?

Answer 1

Amount payable after two years is calculated using the following equation:

A= P(1+r)^n
Where
A= Amount payable, P=Amount borrowed, r = annual interest, n=number of years

Interest, C = A-P
Substituting

C= 200(1+0.12)^2 - 200 = 250.88-200 = $50.88