Multiple choice

A loan of $20,000 has an interest rate of 5% compounded annually. If no payments are made for 3 years, what will be the total amount owed at the end of the 3 years?

  1. $20,125.50
  2. $21,152.50
  3. $23,152.50
  4. $23,225.50
  5. $23,512.50
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Amount = P(1 + r/100)^n = 20000 * (1.05)^3 = 20000 * 1.157625 = 23152.50.

AI explanation

Using the compound interest formula, the total amount owed is Principal times (1 + Rate) raised to the number of years. Substituting the given values gives 20000 times (1.05) cubed, which equals 20000 times 1.157625. Multiplying these values results in a total amount owed of $23,152.50.

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