Question

An amount of 25,000 is borrow for 15 years at 5.5% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid back?

Answer 1

Answer: $55,811.91$

Step-by-step explanation:

Given

Principal amount is 25,000

Time Period is $t=15\ yr$

Rate of interest $r=5.5\%$

Amount in compound interest is given by

$\Rightarrow A=P\left(1+r\%\right)^t$

Insert the values

$\Rightarrow A=25,000(1+\dfrac{5.5}{100})^{15}\\\\\Rightarrow A=25,000(1.055)^{15}\\\Rightarrow A=55,811.91$

Therefore, $55,811.91$ must be paid back