Question

If Claire does not make any payments, how much will she owe after ten years?
Claire wants to take out a small personal loan to renovate her kitchen. She borrows $3,000. Her loan has an annual compound interest rate of 15%. The loan compounds once each year.

When you calculate Claire’s debt, be sure to use the formula for annual compound interest.

A = P (1+)nt

a. $12,136.67
b. $3,481.24
c. $6,090.90
d. $3,232.74

Answer 1

The correct answer is A.

To calculate the amount owed by Claire after ten years, this is the formula of the compound interest that should be used:

$A= P (1+n)^{t}$ = 3,000 (1+0.15)^10 = $12,136.67

where,

• P stands for the principal, the total amount borrowed
• n stands for the interest rate charged for the loan
• t stands for the amount of time spent, measured as the number of years (the laond compounds anually)

Answer 2

Answer:

a. $12,136.67

Explanation: