You received a $5,000 loan at the end of each of your four years of college.Aunt Rose agreed to pay off your loans at the end of your fourth year of school.How much will she have to pay? Assume a 4% interest rate compounded annually on student loans. Use appendix Table 1, Table 2, Table 3 and Table 4.

Question

Quizplus · Accepted Answer

Using Table 2, we can calculate the total amount of the loan at the end of each year:

Year 1: $5,000 x 1.04 = $5,200
Year 2: $5,200 x 1.04 = $5,408
Year 3: $5,408 x 1.04 = $5,626.72
Year 4: $5,626.72 x 1.04 = $5,856.63

So the total amount of the loan at the end of 4 years is $21,235.08. Aunt Rose will have to pay off this amount. Thus, the answer is B.

You Received a $5,000 Loan at the End of Each