Calculate the amount to be paid back on a $20,000 loan with
an interest rate of 12% compounded yearly after five years.
To calculate the amount to be paid back on a 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 amount to be paid back (future value)
P = the principal amount (loan amount)
r = the annual interest rate (converted to decimal)
n = the number of times the interest is compounded per year
t = the number of years
In this case, the principal amount (loan amount) is $20,000, the annual interest rate is 12% (0.12 as a decimal), the interest is compounded yearly (n = 1), and the loan term is 5 years.
Plugging these values into the formula:
A = 20,000(1 + 0.12/1)^(1*5)
A = 20,000(1 + 0.12)^5
A = 20,000(1.12)^5
A = 20,000(1.76234)
A = $35,246.80
Therefore, the amount to be paid back on a $20,000 loan with an interest rate of 12% compounded yearly after five years is $35,246.80.