Question

What is the total amount that will be repaid if the loan described is paid in 2 years?

Answer 1

Given:

Principal value of loan = $1,245

Rate of interest = 5%

To find:

The total amount that will be repaid if the loan described is paid in 2 years.

Solution:

The formula for amount is

$A=P\left(1+\dfrac{r}{100}\right)^t$

Where, P is the principal, r is the rate of interest, t is the number of years.

Putting P=1245, r=5 and t=2, we get

$A=1245\left(1+\dfrac{5}{100}\right)^2$

$A=1245\left(1+0.05\right)^2$

$A=1245\left(1.05\right)^2$

On further simplification, we get

$A=1245(1.1025)$

$A=1372.6125$

$A\approx 1372.61$

Therefore, the total amount that will be repaid if the loan described is paid in 2 years is $1372.61.