Your rich Uncle Ralph is willing to loan you $5000 for 3 1/2 years and asks that you repay your loan with quarterly compounding interest at the rate of 8% per year. How much will you repay after 3 1/2 years?

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r/n)^(nt). Here, P = $5000, r = 0.08, n = 4, t = 3.5. Plugging these values in, A = 5000(1 + 0.08/4)^(4*3.5) = $6597.39.

Your Rich Uncle Ralph Is Willing to Loan You $5000