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frosja888 [35]
3 years ago
10

A certain loan program offers an interest rate of 7%, compounded continuously. Assuming no payments are made, how much would be

owed after two years on a loan of $2500? Do not round any intermediate computations, and round your answer to the nearest cent.
Business
1 answer:
vovikov84 [41]3 years ago
8 0

Answer:

The amount of loan after two years is $2875.68.

Explanation:

Given information:

Interest rate = 7%, compounded continuously.

Time = 2 years

Initial value of loan = $2500

The formula for amount after continuous compound interest is

A=Pe^{rt}

where,  P is principal,r is nominal rate per year, t is time in year.

Substitute P=2500, r=0.07, t=2 in the above formula.

A=2500e^{0.07\cdot 2}

A=2500e^{0.14}

A=2875.68449714

A\approx 2875.68

Therefore the amount of loan after two years is $2875.68.

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