Suppose you borrow $500 and you plan to pay it back all at once in 5 years. you are charged 2% interest compounded monthly.
what is the total amount you will need to pay when the loan is due?

The total amount you will need to pay when the loan is due $553

Step-by-step explanation:

Points to remember

Compound interest

A = P[1 +R/n]^nt

Where A - amount

P - principle amount

R = rate of interest

t -  number of years

n - number of times compounded yearly

To find the total amount charged

Here P = $500, R = 2%, n = 12 and t = 5

A = P[1 +R/n]^nt

  = 500[1 + 0.02/12]^12*5

 = 500 * 1.105

 = 552.54

≈ $553

Therefore the total amount you will need to pay when the loan is due $553

=$552.54

Step-by-step explanation:

To find the total amount that would have accumulated we need to use the compound interest formula.

A=P(1+R/n)ⁿᵇ

where A is the amount, P is the principal R is the decimal  rate and n is the number of periods when the interest is compounded per unit time and b is the time.

A=500 (1+0.02/12)¹²ˣ⁵

  =500(1.0016)⁶⁰

=$552.54

a

step-by-step explanation: