Assume that you borrow $2000 from your sister and that you will pay her back in one lump sum. She charges you 9% interest in year 1 and increases the rate by 1% per year until the loan is paid off. How much will you owe if you wait until year 3 to pay off the loan?
A) $2,467.91
B) $2,661.78
C) $2,775.23
D) $2,809.53

Question

Quizplus · Accepted Answer

In year 1, the interest rate is 9%, so the amount owed is $2000 * 1.09 = $2180. In year 2, the interest rate is 10%, so the amount owed is $2180 * 1.10 = $2398. In year 3, the interest rate is 11%, so the amount owed is $2398 * 1.11 = $2661.78.

Assume That You Borrow $2000 from Your Sister and That