Question

An amount of 45,000 is borrowed for 12 years at 4.25% interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid back?
Use the calculator provided and round your answer to the nearest dollar.

Answer 1

Answer:

The answer to your question is $79,749, to the nearest dollar.

Step-by-step explanation:

45 thousand dollars at 4.5 percent compounded annually for 13 years?

After one year the loan would accrue 4.5% interest, which is 0.045 times $45,000 dollars. Added to the base ($45000) this is (1 + 0.045)* $45,000, or $47,025. (Just over two thousand dollars interest.)

After two years we do this again with the new base, so it is $47,025 times (1.045), or $45,000 times (1.045) times (1.045) which can be written:

45000(1.045)2=49141.125  dollars.

You can see where this is going, I hope. After the thirteenth year we get:

45000(1.045)13≏79,748.8243759089  dollars.