SOLUTION: You take out Php 20,000 loan at a 5% interest rate compounded annually. How much will you owe after 10 years?

Question 1170596: You take out Php 20,000 loan at a 5% interest rate compounded annually. How much will you owe after 10 years?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
without making any payments, the formula you can use is f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.

if the interest rate is compounded annually, then the time periods are in years and no adjustment needs to be made to the interest rate per time period and the number of time periods.

in your problem, the formula becomes:

f = 20,000 * (1 + .05) ^ 10

solve for f to get:

f = 32,577.89254.

round to two decimal places to get $32,577.89.

that's how much you will owe after 10 years.

with this formula, you use the rate, not the rate percent.

the rate is equal to the rate percent / 100.

a rate of 5% equals a rate of .05.
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