Problema Solution

Suppose that $2000 is loaned at the rate of 15%, compounded quarterly. Assuming that no payments are made, find the amount owed after 8 years.

Answer provided by our tutors

P = $2,000 the principal


r = 0.15 or 15% annual interest rate


t = 8 years


n = 4*t = 4*8 = 32 compounding periods (the account is compounded quarterly)


A = future value


A = P(1 + r/4)^n


A = 2000(1 + 0.15/4)^32


by solving we find:


A = $6,496.05


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the amount owned after 8 years will be $6,496.05.