Compound interest

If a loan of $100,000 is taken from a bank at 12% interest compounded monthly. What amount of loan will be repaid at the end of 2nd year?

Solutions

Expert Solution

Here,

Principal amount of loan = $100,000

Annual rate of interest = 12%

Monthly rate of interest = 12% / 12 =1%

Number of years = 2

Total number of months = 2 x 12 = 24

The terms used in formula

A - Amount of loan after 2 year

P - Principal amount

r - monthly interest rate

n - number of months

$ \begin {align}A &= P(1+r)^n\\ &= \$100,000(1+0.01)^{24}\\ &= \$126,973.46 \end{align} $

Hence, the amount of loan repaid after 2 years is $126,973.46

The amount of loan repaid after 2 years is $126,973.46

Vinay answered 2 years ago

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