Problem: Kevin borrowed $2000 from his mother at an interest rate of 5%, compounded monthly. How much does he owe (including the original $2000) at the end of 3 years? Give your answer rounded to the nearest cent. Help, Please?

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Answer 1 · 2018-03-31T16:45:54

$$5,600$

1. The first step is to find out what $5%$ of $$2000$ is. You can do this by writing a proportion such as:

$x/2000=5/100$

$x$ is the amount of interest in $$$

2. Cross multiply to get:

$2,000*5=100x$

3. Simplify

$10,000=100x$

4. Divide both sides by $100$ to get the value of $x$ .

$100=x$

5. You now know the value of interest for one month, but you need to find out what is after 3 years. There are 12 months in each years so:

$3*12=36$

6. Times the value of one month's interest by 36 months.

$$100 * 36 months=$3,600$

7. Add the amount of interest to the original $$2,000$ .

$$3,600+$2,000=$5,600$

Kevin will owe his mother $$5,600$ by the end of 3 years.