Myrna borrows $500 at an annually compounded interest rate of 8 percent that she will repay at the end of 10 years. How much will be required to pay off the loan at the end of 10 years?
A) $900
B) $962.85
C) $1,079.46
D) $1,123.21

Question

Quizplus · Accepted Answer

Using the formula for compound interest: 
A=P(1+r/n)^(nt) 
where A is the final amount, P is the principal (initial amount borrowed), r is the annual interest rate (as a decimal), n is the number of times interest is compounded annually, and t is the time in years. 
Plugging in the values: 
A = 500(1+0.08/1)^(1*10) 
A = $1,079.46 
Therefore, choice C is the correct answer.

Myrna Borrows $500 at an Annually Compounded Interest Rate of 8