Kendra took out a loan for 12,500 for 3 years compounded annually at an interest rate of 18%. How much does she owe?
what is 12500(1.18)^3 ?
I believe you just add 18% for every year.
To calculate the amount Kendra owes on the loan, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the total amount (or future value) including principal and interest
P = the principal amount (the initial loan amount)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
In this case, Kendra took out a loan of $12,500, the interest rate is 18%, compounded annually, and the loan term is 3 years.
First, let's convert the interest rate to a decimal by dividing it by 100:
r = 18% / 100 = 0.18
Next, substitute the given values into the formula:
A = 12,500(1 + 0.18/1)^(1*3)
Simplifying inside the parentheses:
A = 12,500(1.18)^3
Calculate the exponent:
A = 12,500(1.583496)
Multiply the principal amount by the result:
A = $19,793.70
Therefore, Kendra owes approximately $19,793.70 on the loan after 3 years of compounding annually at an 18% interest rate.