business math

Question

a loan is borrow for $1,800 for 2 years at a compounded interest of 6% interest is compounded annually. what is the compound amount

Answer 1

the underlying compound interest formula that you want to use on this one is

A = P(1 + r)^t

for this scenario that means taking

A = 1800(1 + 0.06)^2

A = 1800(1.06)^2

A = 2022.48

meaning that the final compounded amount here is $2,022.48

Answer 2

1800 *(1.06^2) = 2,022.48 total, subtract 1800 = 222.48

 

Broken down...

1800 *1.06 = 1908
1908*1.06 = 2022.48
then subtract the original amount to get your answer, 2022.48-1800