The formula for compound interest is A = P(1 + r/n)^(nt), where:
A is the future value of the investment/loan, including interest
P is the principal investment amount (the initial loan amount)
r is the annual interest rate (decimal)
n is the number of times that interest is compounded per year
t is the number of years the money is invested/borrowed for.
In this case, P is $25,000, r is 5% or 0.05, n is 1 (compounded yearly), and t is 4.
Plugging the values into the formula, we get:
A = 25000(1 + 0.05/1)^(1*4)
A = 25000(1 + 0.05)^4
A = 25000(1.05)^4
A = 25000(1.21550625)
A ≈ $30387.66
Therefore, Jonathan will need to pay back approximately $30,387.66 when he finishes college.
Jonathan took out a $25,000 student loan to go to college. The loan charges 5% interest compounded yearly. How much will Jonathan need to pay back when he finishes college in four years? Round the answer to two decimal places.
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