Suppose you borrow $500 and you plan to pay it back all at once in 5 years. You are charged 2% interest compounded monthly.

What is the total amount you will need to pay when the loan is due?

Round your answer to the nearest dollar.

he will need to pay $554 when the loan is due.

Step-by-step explanation:

We would apply the compound interest formula which is expressed as

A = P(1+r/n)^nt

Where

A = total value of the loan at the end of t years.

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount borrowed.

From the information given,

P = 500

r = 2% = 2/100 = 0.02

n = 12 because it was compounded 12 times in a year.

t = 5 years

Therefore,

A = 500(1+0.02/12)^12 × 5

A = 500(1+0.0017)^60

A = 500(1.0017)^60

A = $554 to the nearest dollar

overpriced

step-by-step explanation: