Answer:
amount owed = $7434.57
Step-by-step explanation:
To solve this problem, we have to use the following formula:
[tex]\boxed{A = P(1 + \frac{r}{n})^{nt}}[/tex],
where:
• A = final amount
• P = principal (initial) amount
• r = annual interest rate
• n = amount of times the interest is compounded per time period
• t = number of years the money is kept for
In this case, the principal amount, P = $5000 and the money is owed for two years, so t = 2. The annual interest rate, r = 0.20 (20% = [tex]\frac{20}{100}[/tex] = 0.2). The interest is compounded monthly, which means it is compounded 12 times per year. Therefore, n = 12.
Using the above information and formula, we can calculate the amount owed after 2 years:
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]
[tex]= 5000(1 + \frac{0.2}{12})^{12 \times 2}[/tex]
[tex]=[/tex] $7434.57
Therefore, the amount Edgar owes after 2 years is $7434.57.
