Question

Allan borrows 1870 dollars from his uncle. Two years later, he borrows another 1240 dollars. If his uncle charges him 8 percent interest compounded annually, how much does Allan owe 6 years after the first loan?

Answer 1

For t=0
Allan borrows--------------------------- > 1870 dollars

for t=6 years
F1 = P*(1 +(r/m))^n
i=r/m
n=m*t---------- >1*6=6
we have
P1=1870
r=8%
m=1
t=6 years
F1 = 1870*(1 +(0.08/1))^6------------------ >2967.45 dollars

for t=2
Allan borrows--------------------------- > 1240 dollars

for t=6 years
F2 = P2*(1 +(r/m))^n
i=r/m
n=m*t---------- >1*4=4
we have
P2=1240
r=8%
m=1
t=4 years------------> (6-2)=4 years
F2 = 1240*(1 +(0.08/1))^4------------------ >1687 dollars

F1+F2=2967.45+1687=4654.45 dollars
the answer is 4654.45 dollars