If you borrow $20 000 for four years at an interest rate of 7.23% per annum,with the interest compounding quarterly,how much will you have to pay at the end of the period?
A) $21 485.68
B) $26 442.06
C) $25 784.00
D) $26 638.29

Question

Quizplus · Accepted Answer

Using the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
A = amount at the end of the period
P = principal (starting amount)
r = annual interest rate
n = number of times the interest is compounded per year
t = number of years
In this case:
P = $20 000
r = 7.23% = 0.0723
n = 4 (quarterly)
t = 4 years
A = $20 000(1 + 0.0723/4)^(4*4) = $26 638.29
Therefore, the answer is D.

If You Borrow $20 000 for Four Years at an Interest