Suppose that a loan of $6000 is given at an interest rate of 9% compounded each year.

Assume that no payments are made on the loan.

Follow the instructions below. Do not do any rounding.

(a) Find the amount owed at the end of 1 year.

(b) Find the amount owed at the end of 2 years.

Answer: a) $6649

b) $7128.6

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

A = P (1 + r/n) ^nt

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = 6000

r = 9% = 9/100 = 0.09

n = 1 because it was compounded once in a year.

a)

t = 1 year

Therefore,

A = 6000 (1 + 0.09/1) ^1 * 1

A = 6000 (1.09)

A = $6649

b) t = 2 years

A = 6000 (1.09) ^2

A = $7128.6