Question #94cd0

1 Answer
Mar 13, 2016

Answer:

#$1166.40#

Explanation:

Recall that the formula for compound interest is:

#color(blue)(|bar(ul(color(white)(a/a)A=P(1+i)^ncolor(white)(a/a)|)))#

where:
#A=#future value
#P=#principal (starting amount)
#i=#interest rate per compounding period
#n=#number of compounding periods

#1#. Start by substituting your values into the formula. Note that in your case, one compounding period would be equal to one year.

#A=P(1+i)^n#

#A=2000(1+0.08)^2#

#2#. Solve for #A#.

#A=$2332.80#

#3#. Since the money is paid back in two equal annual installments, divide the value of #A# by #2#. This is the amount of money that will be paid each year until the debt is paid off.

#x=A-:2#

#x=$2332.80-:2#

#color(green)(|bar(ul(color(white)(a/a)x=$1166.40color(white)(a/a)|)))#

#:.#, the annual installment is #$1166.40#.