Question

Problem: Kevin borrowed $2000 from his mother at an interest rate of 5%, compounded monthly. How much does he owe (including the original $2000) at the end of 3 years? Give your answer rounded to the nearest cent. Help, Please?

Answer 1

`$5,600`

Explanation:

1. The first step is to find out what `5%` of `$2000` is. You can do this by writing a proportion such as:

`x/2000=5/100`

`x` is the amount of interest in `$`

2. Cross multiply to get:

`2,000*5=100x`

3. Simplify

`10,000=100x`

4. Divide both sides by `100` to get the value of `x`.

`100=x`

5. You now know the value of interest for one month, but you need to find out what is after 3 years. There are 12 months in each years so:

`3*12=36`

6. Times the value of one month's interest by 36 months.

`$100 * 36 months=$3,600`

7. Add the amount of interest to the original `$2,000`.

`$3,600+$2,000=$5,600`

Kevin will owe his mother `$5,600` by the end of 3 years.