Suppose you borrow $500 and you plan to pay it back all at once in 5 years. You are charged 2% interest compounded monthly.

What is the total amount you will need to pay when the loan is due?

=$552.54

Step-by-step explanation:

To find the total amount that would have accumulated we need to use the compound interest formula.

A=P (1+R/n) ⁿᵇ

where A is the amount, P is the principal R is the decimal rate and n is the number of periods when the interest is compounded per unit time and b is the time.

A=500 (1+0.02/12) ¹²ˣ⁵

=500 (1.0016) ⁶⁰

=$552.54