A business owner borrows $50,000 at 8% annual interest. After 2 years with compound interest, how much do they owe?
Answer
$58320
How to solve it
1
Principal: $50,000
2
Rate: 8% annually
3
Year 1: $50,000 × 1.08 = $54,000
4
Year 2: $54,000 × 1.08 = $58,320
Hints
Use compound interest formula
Calculate year by year
Multiply by 1.08 each year