If a person borrows $2,000 at 5% annual interest and never makes any payments, how much will the loan balance be after two years?
A) $2,005.25
B) $2,010
C) $2,200
D) $2,205

Question

Quizplus · Accepted Answer

After the first year, the loan balance will be $2,000 + (0.05 x $2,000) = $2,100. 
After the second year, the loan balance will be $2,100 + (0.05 x $2,100) = $2,205. Therefore, the answer is D.

If a Person Borrows $2,000 at 5% Annual Interest and Never