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Loan #1
Year Amount owed
1 $3796
2 $3942
3 $4088



Loan # 2
Year Amount owed
1 $977.53

2 $1036.18
3 1098.35

For loan #1 is simple interest. Loan #2 is compound interest
How much was each loan originally
Determine the future value of each loan after 10 years
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  • math -

    #1 - simple interest,
    interest earned in 1st year = 3942-3796 = 146
    rate = 146/3796 = .0385 or 3.85%

    check : is 2(146) + 3796 = 4088 ? , YES!

    #2, let the rate be i
    for 1st year ...

    977.53(1+i) = 1036.18
    1+i = 1.059998
    i = .059998 or .06 = 6%

    check: is 977.53(1.059998)^2 = 1098.35 ? YES!

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