Julie took out a loan for college for 25,000. If the interest rate is compounded annual 5% what is the total amount of money julie will owe after four years
To calculate the total amount of money Julie will owe after four years, we need to use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = The total amount of money Julie will owe after four years
P = The initial loan amount (25,000)
r = The interest rate (5% or 0.05)
n = The number of times the interest is compounded per year (in this case it is annually, so n = 1)
t = The number of years (4)
Plugging in the values into the formula:
A = 25,000(1 + 0.05/1)^(1*4)
A = 25,000(1 + 0.05)^4
A = 25,000(1.05)^4
A = 25,000(1.2155)
Calculating the final amount:
A = $30,387.50
So, Julie will owe approximately $30,387.50 after four years.