M110 - Module 6- Advanced Functions & Logarithms - 3. Compounding Questions.docx

What is the annual interest on a $5,000 loan with a 5% interest rate? (The dollar sign is implied in your answer.)
Multiply $5,000 × 5% to determine that the annual interest is $250
If an interest rate of 5% results in interest of $50, what is the principal amount of the loan? Sasha is starting a company, so she borrows $5,000 from her local bank. The terms of the loan are 6% interest rate
with a 2-year maturity. She doesn't have to pay any interest until the end of the loan. What will she need to repay
the bank at the end of two years?
Use the compound growth formula: payment = principle (1 + rate)time
Substitute $5,000 in for principle, 6% in for interest rate, and 2 in for time to get payment = $5,000(1.06)2
Simplify the right side of the equation to get $5,618