Question Jonathan took out a $25,000 student loan to go to college. The loan charges 5% interest compounded yearly. How much will Jonathan need to pay back when he finishes college in four years? Round the answer to two decimal places.(1 point)
To calculate how much Jonathan needs to pay back after four years, we can use the formula for compound interest:
A = P(1+r/n)^(nt)
Where:
A = the amount Jonathan needs to pay back after four years
P = the principal loan amount, which is $25,000
r = the annual interest rate, which is 5% expressed as a decimal (0.05)
n = the number of times the interest is compounded per year, which is 1 (compounded yearly)
t = the number of years, which is 4 years
Plugging in the values into the formula:
A = 25000(1+0.05/1)^(1*4)
A = 25000(1+0.05)^4
A = 25000(1.05)^4
A = 25000(1.21550625)
A = $30,387.66
Therefore, Jonathan will need to pay back $30,387.66 when he finishes college in four years.