A manufacturing firm takes out a $500,000 loan to expand its plant.The loan has an annual interest rate of 7 percent.What would be the total compounded interest on the loan at the end of five years, excluding the principal?

Question

Quizplus · Accepted Answer

The total compounded interest can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt) - P, where P is the principal amount ($500,000), r is the annual interest rate (0.07), n is the number of times interest is compounded per year (1 for annually), and t is the number of years (5). The calculation gives $201,275 as the total compounded interest.

A Manufacturing Firm Takes Out a $500,000 Loan to Expand