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Suppose that a loan of $3500 is given at an interest rate of 12% compounded each yea Assume that no payments are made on the loan. Follow the instructions below. Do not do any rounding. (a) Find the amount owed at the end of 1 year. s (b) Find the amount owed at the end of 2 years. ​

Respuesta :

(a) The amount owed at the end of 1 year is $3,920.

(b) The amount owed at the end of 2 year is $4,390.4.

Annual Compound Interest (C.I) Formula:

A = P(1 + r/n)^t

C.I = A - P

In the above expression,

A is the final amount after t time

P is the principal amount

r is the rate of interest(decimal)

n is frequency or no. of  times the interest is compounded annually

t is the time in years/months.

C.I. is compound Interest

It is given that loan is compounded annually. so, n=100

(a) Here, we have

P = $3500

r = 0.12

t = 1 year

now, using A = P(1 + r/100)^t

A = 3500 x ( 1 + 0.12)^1

A = 3500 x 1.12

A = $3,920

C.I = A - P

C.I. = $3920 - $3500

C.I = $420

(b) Here, we have

P = $3500

r = 0.12

t = 2 year

now, using A = P(1 + r/100)^t

A = 3500 x ( 1 + 0.12)^2

A = 3500 x 1.12 x 1.12

A = $4,390.4

C.I = A - P

C.I. = $4,390.4 - $3500

C.I = $890.4

Hence,

(a) The amount owed at the end of 1 year is $3,920.

(b) The amount owed at the end of 2 year is $4,390.4.

Learn more about "Compound Interest" from here: https://brainly.com/question/13155407

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