Background Info: Tom finds a second personal loan option. This loan would also require him to repay the principal in one lump sum after three years.
Loan Option B
Principal: $9,000
Type of Interest: Compound Interest
Interest Rate: 8%
Rate of Accrual: Once per year
Use the formula for annual compound interest.
A = P (1 + r/n) ^nt
Remember, A refers to the total amount owed.
Calculate the total amount that Tom would repay.
$10,337
$11,337
$12,337
$13,337
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