Question 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.(1 point)

Answer 1

To calculate how much Jonathan needs to pay back after four years, we can use the formula for compound interest:

A = P(1+r/n)^(nt)

Where:
A = the amount Jonathan needs to pay back after four years
P = the principal loan amount, which is $25,000
r = the annual interest rate, which is 5% expressed as a decimal (0.05)
n = the number of times the interest is compounded per year, which is 1 (compounded yearly)
t = the number of years, which is 4 years

Plugging in the values into the formula:

A = 25000(1+0.05/1)^(1*4)
A = 25000(1+0.05)^4
A = 25000(1.05)^4
A = 25000(1.21550625)
A = $30,387.66

Therefore, Jonathan will need to pay back $30,387.66 when he finishes college in four years.