The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank charging you?

Question

Quizplus · Accepted Answer

This is a problem of finding the interest rate for a loan with compound interest. We can use the formula for compound interest:

Future value = Present value x (1 + interest rate)^n

where:
Future value = $42,135
Present value = $30,000
n = 3 years

Substituting these values, we get:

$42,135 = $30,000 x (1 + interest rate)^3

Solving for the interest rate using a financial calculator, we get:

Interest rate = 12.10%

Since we need to choose from the given answer choices, the closest answer is C, which is 12%. Therefore, the best choice is C.

The First National Bank Has Agreed to Lend You $30,000