Question

Scott borrowed $8000 at a rate of 19%, compounded annually. Assuming he makes no payments, how much will he owe after 8 years? Round your answer to the nearest cent

Answer 1

To answer this question we will use the following formula for compounded interest:

$A=A_0(1+r)^t,$

where A is the final amount, A₀ is the initial amount, r is the interest rate as a decimal number, and t is the number of times that the interest rate is applied.

Substituting A₀=8000, r=0.19, and t=8 we get:

$A=8000(1+0.19)^8\text{.}$

Simplifying the above result we get:

$\begin{gathered} A=8000(1.19)^8, \\ A\approx32171.08 \end{gathered}$

Answer: $32171.08.