Allan borrows 1870 dollars from his uncle. Two years later, he borrows another 1240 dollars. If his uncle charges him 8 percent interest compounded annually, how much does Allan owe 6 years after the first loan?
for t=0 Allan borrows--------------------------- > 1870 dollars
for t=6 years F1 = P*(1 +(r/m))^n i=r/m n=m*t---------- >1*6=6 we have P1=1870 r=8% m=1 t=6 years F1 = 1870*(1 +(0.08/1))^6------------------ >2967.45 dollars
for t=2 Allan borrows--------------------------- > 1240 dollars
for t=6 years F2 = P2*(1 +(r/m))^n i=r/m n=m*t---------- >1*4=4 we have P2=1240 r=8% m=1 t=4 years------------> (6-2)=4 years F2 = 1240*(1 +(0.08/1))^4------------------ >1687 dollars
F1+F2=2967.45+1687=4654.45 dollars the answer is 4654.45 dollars
