Calculate the amount to be paid back on a $20,000 loan with an interest rate of 12% compounded yearly after five years.(1 point)
Responses
$640,000
$1,030,726
$35,246.83
$51,470
To calculate the amount to be paid back on a $20,000 loan with an interest rate of 12% compounded yearly after five years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the loan
P = the principal amount (initial loan amount) = $20,000
r = the interest rate per period = 12% = 0.12
n = the number of compounding periods per year = 1 (compounded yearly)
t = the number of years = 5
Plugging in the values, we get:
A = 20,000(1 + 0.12/1)^(1*5)
A = 20,000(1.12)^5
A = 20,000(1.7623)
A ≈ $35,246.83
Therefore, the correct response is option C: $35,246.83