Given:
Principal value of loan = $1,245
Rate of interest = 5%
To find:
The total amount that will be repaid if the loan described is paid in 2 years.
Solution:
The formula for amount is
[tex]A=P\left(1+\dfrac{r}{100}\right)^t[/tex]
Where, P is the principal, r is the rate of interest, t is the number of years.
Putting P=1245, r=5 and t=2, we get
[tex]A=1245\left(1+\dfrac{5}{100}\right)^2[/tex]
[tex]A=1245\left(1+0.05\right)^2[/tex]
[tex]A=1245\left(1.05\right)^2[/tex]
On further simplification, we get
[tex]A=1245(1.1025)[/tex]
[tex]A=1372.6125[/tex]
[tex]A\approx 1372.61[/tex]
Therefore, the total amount that will be repaid if the loan described is paid in 2 years is $1372.61.
