The formula to calculate the final amount (A) after compounding is given as:
A = P(1 + r/n)^(nt)
Where:
A = final amount
P = principal amount (initial loan)
r = annual interest rate (6.5% or 0.065)
n = number of times interest is compounded per year (6 times in 2 months)
t = number of years (8 years)
Substituting the given values:
8,386.65 = P(1 + 0.065/6)^(6*8)
Rearranging the equation:
P = 8,386.65 / (1 + 0.065/6)^(6*8)
P ≈ 4,725.04
Therefore, the principal amount (initial loan) taken by Amin is approximately RM 4,725.04.
Amin took a loan of RM P from bank at an interest rate of 6.5% compounded every two months.
After 8 years, the amount to be paid is RM 8,386.65. Find P ??
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