MATHEMATICS QUESTION

Question

Eon borrowed 20,000 ,to start up his consulting business. The interest of loan rate is at 5.6 %

2 years.. How much will he pay , for loan ? ( expressed as a decimal 0.056 )

Using formula p= prt ( where p is the principle, r is the rate , t is the time )

Answer 1

for continuously compounded interest the formula is

A= Pe^rt,

for yearly compounded interest, the formula is

A =P(1+r/n)^nt where P = Present value of the loan amount

A = Amount to be repaid after t years

t = time in years

r = annual rate of interest APR

n = number of compounding periods per year

n=1, t=2, r =.056, P=20,000

A=20,000e^.056(2) for continuous compounding = $22,370.26

A=20,000(1.056)^2 for annual compounding = $22,302.72

with total interest to be paid = $2,302.72

for other compounding periods, such as daily, monthly, quarterly

the amount to be repaid is between $22,370.26 and $22,302.72

if there is no compounding, just simple interest then the amount to be repaid

= 20,000 + 2(.056)20,000 = 20,000(1.112) = $22,240.00