Respuesta :
(a) The amount owed at the end of 1 year is $3,920.
(b) The amount owed at the end of 2 year is $4,390.4.
Annual Compound Interest (C.I) Formula:
A = P(1 + r/n)^t
C.I = A - P
In the above expression,
A is the final amount after t time
P is the principal amount
r is the rate of interest(decimal)
n is frequency or no. of  times the interest is compounded annually
t is the time in years/months.
C.I. is compound Interest
It is given that loan is compounded annually. so, n=100
(a) Here, we have
P = $3500
r = 0.12
t = 1 year
now, using A = P(1 + r/100)^t
A = 3500 x ( 1 + 0.12)^1
A = 3500 x 1.12
A = $3,920
C.I = A - P
C.I. = $3920 - $3500
C.I = $420
(b) Here, we have
P = $3500
r = 0.12
t = 2 year
now, using A = P(1 + r/100)^t
A = 3500 x ( 1 + 0.12)^2
A = 3500 x 1.12 x 1.12
A = $4,390.4
C.I = A - P
C.I. = $4,390.4 - $3500
C.I = $890.4
Hence,
(a) The amount owed at the end of 1 year is $3,920.
(b) The amount owed at the end of 2 year is $4,390.4.
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