Suppose you borrow $1,000 at 8% for 2 years.If the interest is compounded annually,how much money will you owe at the end of those 2 years?
A) $1,080.00
B) $1,160.00
C) $1,166.40
D) $1,345.60

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where:
A = the total amount owed at the end of the period
P = the principal amount (initial loan)
r = the annual interest rate (8%)
n = the number of times the interest is compounded per year (annually)
t = the number of years (2)

Plugging in the values, we get:

A = 1000(1 + 0.08/1)^(1*2)
A = 1000(1.08)^2
A = $1,166.40

Therefore, the answer is C) $1,166.40.

Suppose You Borrow $1,000 at 8% for 2 Years