# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### COMPOUND INTEREST

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The Henley’s took out a loan for \$195, 000 to purchase a home. At a 4.3% interest rate compounded annually, how much will the loan be after 5 years?
 A \$45, 689 B \$240, 689 C \$195, 000 D \$41, 925
Explanation:

Detailed explanation-1: -You can calculate your total interest by using this formula: Principal loan amount x interest rate x loan term = interest.

Detailed explanation-2: -Here’s the formula for calculating compound interest: CI = P (1+r/n) ^nt – P. To solve, plug the described information into the designated spots. Then divide the rate (r) by the number of times compounded (n) and add it to one.

Detailed explanation-3: -A = P (1 + r / m) mt P (Initial value of investment) = \$ 5, 000. r (rate of return) = 10% compounded annually. m (number of the times compounded annually) = 1. t (number of years for which investment is made) = three years.

Detailed explanation-4: -Effective Rate on a Simple Interest Loan = Interest/Principal = \$60/\$1, 000 = 6% Effective rate on a Loan with a Term of Less Than One Year = \$60/\$1, 000 X 360/120 = 18% Effective rate on a discounted loan = (60 X 360/360)/(\$1, 000-60) = 6.38% More items •13-Sept-2022

There is 1 question to complete.