Your grandmother has promised you $1,000 when you graduate in two years. At a 6% annual interest rate, you can borrow $890 and pay it all back with your grandmother's gift at graduation.

Question

Quizplus · Accepted Answer

Assuming that the interest is compounded annually, the amount you will owe after two years will be:

$890 * (1 + 0.06)^2 = $890 * 1.1236 = $1,000.24

Therefore, you will be able to pay back the full amount of the loan with your grandmother's gift of $1,000 at graduation.

Your Grandmother Has Promised You $1,000 When You Graduate in Two