13. Justin generously lends $500,000 to his friend, Jamie. However, being a maleficent businessman, he charges Jamie interest at 8.6 % per annum compounded quarterly. How much will Jamie owe Justin after 25 years? What is the accumulated interest? [3 marks]
Accepted Solution
A:
Answer:Jamie will owe $ 41,95,725.83 ( approx ),Accumulated interest is $ 36,95,725.83Step-by-step explanation:Since, the amount formula in compound interest is,[tex]A=P(1+\frac{r}{n})^{nt}[/tex]Where, P is the principal amount,r is the annual rate of interest,n is the compounding periods in a year,t is the time in years,Here, P = $ 500,000,r = 8.6 %=0.086,n = 4, t = 25 years,By substituting the values,[tex]A=500000(1+\frac{0.086}{4})^{100}[/tex][tex]=500000(1+0.0215)^{100}[/tex][tex]=500000(1.0215)^{100}[/tex][tex]=4195725.82746[/tex][tex]\approx 4195725.83[/tex]Also, the accumulated interest = A-P = 4195725.83 - 500000 = $ 3695725.83