A bank loans you $5000 for school to be repaid with 4% interest how much do you owe after 2 years? 4 years? and 7 years?
1 answer:
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Answer:
$3489.39
Step-by-step explanation:
This question is an example of compound interest. To work this out you would first have to convert the percentage of 8% into a decimal. To do this you would divide the percentage of 8 by 100, which gives you 0.08. You would divide the percentage by 100 as percentages of a whole amount are out of 100.
The next step is to add 1 to 0.08, which gives you 1.08. This is because the question is asking to increase the amount by 8% and that as 1 is the whole amount, this means that 1.08 is 8% more than the whole amount.
Then to work out how much there will be after 15 years you would multiply the amount of 1100 by 1.08 to the power of 15, which gives you 3489.39. This is because to work out 8% would only work it out for one year however for compound interest you would need to work out 8% extra and then the next year work out the 8% of the new total.
1) Divide 8 by 100.
2) Add 1 to 0.08.
3) Multiply 1100 by 1.08 to the power of 15.