Suppose that you need $4000 to purchase equipment. If you are applying for a discounted loan at an interest rate of 5% per year for 3 years, how much do you need to borrow to cover the principal?
A) $4000
B) $4600
C) $4705.88
D) $4821.76

Question

Quizplus · Accepted Answer

To calculate the amount needed to borrow, we can use the formula for compound interest:
A = P (1 + r/n)^(nt)
Where A is the total amount, P is the principal, r is the interest rate, n is the number of times the interest is compounded per year, and t is the time period in years.
Substituting the given values, we get:
A = 4000 (1 + 0.05/1)^(1*3)
A = 4000 (1.05)^3
A = 4705.88
Therefore, you need to borrow $4705.88 to cover the principal.

Suppose That You Need $4000 to Purchase Equipment