Question

You owe $10,000 on a car loan. The bank charges a compound interest rate of 9.5% per year. If you don't make any payments on the loan, how much will you owe after 3 years? Round your answer to the nearest whole cent.

Answer 1

Since you pay 9.5% extra per year, that is equal to 109.5% of last year, or 1.095 in decimal form
The base equation:
\[y=ka^x\]
Sub in your values:
\[y=10000\times1.095^3\]
Simply solve for that
\[y=10000\times1.095^3\]\[y=10000\times1.312932375\]\[y=13129.3\]
So you would owe \($13129.30\), after 3 years, given that you do not deposit any money over the course of that time