Question

Lee Wills loaned Audrey Chin $16,000 to open Snip Its Hair Salon. After 6 years, Audrey will repay Lee with 8% interest compounded quarterly.

How much will Lee receive at the end of 6 years? (Use the Table provided.) (Do not round intermediate calculations. Round your answer to the nearest cent.)

Answer 1

Answer: $25734.4

Step-by-step explanation:

The following information can be gotten from the question:

Amount loaned = $16000

Time = 6 years

Interest rate = 8%

We then calculate the number of period that'll be used to repay the loan. It should be noted that the interest is compounded quarterly This will be:

= 4 × 6

= 24 periods

Rate per period annually will be:

= 8%/4

= 2%

The future table value will give a value of 1.6084 which will then be multiplied by $16,000 to get our answer. This will be:

= 1.6084 × $16,000

= $25734.4

Answer 2

The amount of money Lee would receive at the end of 6 years is $25,735.

The formula that can be used to determine the amount of money that Lee would receive at the end of 6 years is:

FV = P (1 + r)^nm

• FV = Future value of the loan
• P = amount of the loan
• R = interest rate = 8%/4 = 2%
• m = number of compounding = 4  
• N = number of years = 6  

$16,000 x (1.02)^24 = $25,735

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