Practice!

Sample Problem

The lending rate for three years of the bank by 5% each year for the last two years and at the beginning of the first year, the lending rate was 12%.

(a) What was the lending rate for three years of the bank at the end of the last 2 years?

%

(b) If Mr. Lee was loaned $30,000  at the end of the last 2 years, how much interest would he pay the bank?

$ .00

Solution

 (a) The lending rate at the end of the last 2 years: 12 % × (1 + 5%) × (1 + 5%) = 13.23%

 (b) The interest he would pay: 30000 × 13.23% = 3969 dollars