You borrow $5000 at 7% per annum compounded semi-annually.  You're to repay the money in 4 years. How much money will you owe?

will you owe at the end of the 4 years?

2 Answers

Relevance
  • TomV
    Lv 7
    1 month ago
    Favourite answer

    A(t) = A₀(1+r/n)^(nt)

    where:

    A(t) = amount owed at the end of t years

    A₀ = original amount borrowed

    r = annual rate of interest

    n = number of compounding periods per year

    Let:

    A₀ = $5000

    r = 0.07

    n = 2 (semiannual is compounding twice per year)

    t = 4 year term

    A(4) = 5000(1+0.07/2)^(2*4)

     = 5000(1.035)^8

     = $6584.05 (rounded to the nearest cent)

  • 1 month ago

    A = P(1+r)ᴺ

    A = 5000(1+0.07)⁴ = 6553.98

    Compound Interest

    Interest compounded annually

    A = P(1+r)ᴺ

    r is annual rate as a decimal

    P is principle

    N is number of years

    A is present value

Still have questions? Get answers by asking now.