P = principal amount borrowed. i = the interest rate. N = the term of the loan, in years. F = the total amount paid at the end of the designated number of years.
F = P(1 + i)^N
P would be $4,000. i would be 10%. N would be 4 years. F would be what you are trying to find.
F = 4000(1 + 10%)^4. Note that to make things easier, you can convert the interest percentage to decimals so the equation would be F = 4000(1 + 0. 1)^4
”You borrow 5,000 from a bank and plan to repay the loan principal, plus and accumulated interest in five years. The rate of the interest is 10%. How much will you pay, in total, at the end of the five years?
F = 5000(1 + 0. 1)^5.
Solve (1 + 0.
- = 1. 1. So now our equation looks like this: F = 5000(1. 1)^5.
(1. 1)^5 means multiplying 1. 1 to itself five times. In this case, (1. 1)^5 = 1. 61051.
F = 5000(1. 61051) therefore, F = $8,052. 55. That means that you would have paid $8,052. 55 over the course of the five years.
