To calculate the amount to be paid back after two years on a $5,000 credit card loan with an interest rate of 20% compounded yearly, we can use the formula for compound interest:
\[ A = P(1 + r)^n \]
Where:
- \(A\) is the amount of money accumulated after n years, including interest.
- \(P\) is the principal amount (the initial amount of money, in this case, $5,000).
- \(r\) is the annual interest rate (decimal, so 20% becomes 0.20).
- \(n\) is the number of years the money is invested or borrowed (in this case, 2 years).
Substituting the values, we get:
\[ A = 5000(1 + 0.20)^2 \]
\[ A = 5000(1.20)^2 \]
\[ A = 5000(1.44) \]
\[ A = 7200 \]
Therefore, the amount to be paid back after two years is $7,200.
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