1. If Alexhas a loan balance of 12,000 that is compounded daily at a rate of 6.25% If he makes no payments on the account, what will be in 5 years?

Question

Answer 1

To solve this problem, we need to use the formula for compound interest:

Where:-

is the amount of money accumulated after

years, including interest.-

is the principal amount (the initial amount of money).-

is the annual interest rate (decimal).-

is the number of times that interest is compounded per year.-

is the time the money is invested for in years.Given:-

-

(since the interest is compounded daily)-

yearsNow, plug these values into the formula:

First, calculate the daily interest rate:

Next, add 1 to the daily interest rate:

Then, raise this to the power of

:

Finally, multiply this by the principal amount:

So, the amount in the account after 5 years will be approximately

.

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