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15 September, 08:18

Mark borrowed $200 at 12% compound interest for two years. If he makes no payments. How much interest will he owe at the end of the second year?

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  1. 15 September, 12:15
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    Amount payable after two years is calculated using the following equation:

    A = P (1+r) ^n

    Where

    A = Amount payable, P=Amount borrowed, r = annual interest, n=number of years

    Interest, C = A-P

    Substituting

    C = 200 (1+0.12) ^2 - 200 = 250.88-200 = $50.88
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