Question

What is the total repayment made, including principal and interest, on a loan of $1,100 at 3.5% interest compounded annually over four years?

Answer 1

The total repayment made, including principal and interest is $1262.27

Compound interest

The formula for calculating the compound interest is calculated as shown below;

A = P(1+r)^t

where

P is the principal = $1100

rate = 3.5% = 0.035

time "t" =4 years

Substitute

A. = 1100(1+0.035)^4
A = 1100(1.035)^4
A = 1100(1.14752)

A = 1262.27

Hence the total repayment made, including principal and interest is $1262.27

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