Ryan has an eight-year loan for $6,000. He is being charged an interest rate of 5 percent, compounded annually. Calculate the total amount that he will pay.

Given:

Principal : $6,000

Interest Rate: 5%

Term : 8 years, compounded annually.

The term compounded annually is a hint that informs us to use the compounded interest formula instead of the simple interest formula.

Compounded interest formula is:

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

where:

A = future value of loan or investment including the interest

P = principal

r = rate

n = the number of times the interest is compounded per year

t = the number of years the money is borrowed or invested

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

A = 6,000 (1 + 0.05/1) ¹ * ⁸

A = 6,000 (1.05) ⁸

A = 6,000 (1.48)

A = 8,880

The total amount Ryan will pay after 8 years is $8,880.00