Gina has a personal loan of K12500 charged at an interest rate of 5% compounded annually. She is required to repay the loan after 5 years. How much interest will she pay in total after repaying the loan?
The total amount that Gina will repay after 5 years is the sum of the loan amount and the interest.
The loan amount is K12500.
The interest rate is 5% per year, so the interest after 5 years is 5/100 * K12500 = K<<5/100*12500=625>>625.
Therefore, Gina will pay a total of K625 in interest after repaying the loan.
To calculate the total interest Gina will pay after repaying the loan, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the total amount including interest
P = the principal amount (loan amount)
r = the annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case,
P = K12500
r = 5% = 0.05 (as a decimal)
n = 1 (compounded annually)
t = 5 years
Substituting these values into the formula:
A = K12500(1 + 0.05/1)^(1*5)
A = K12500(1 + 0.05)^5
A = K12500(1.05)^5
Therefore, the total amount including interest (A) after repaying the loan is:
A = K12500(1.05)^5
A ≈ K15444.55
To calculate the interest paid, we subtract the principal amount from the total amount:
Interest = A - P
Interest = K15444.55 - K12500
Interest ≈ K2944.55
Therefore, Gina will pay approximately K2944.55 in interest after repaying the loan.