Brent Pickett borrowed 4000 from his brother Dave. He agreed to repay the money at the end of 2 years, giving Dave the same amount of interest that he would have received if the money had been invested at 1.25% compounded quarterly. How much money did Brent repay his brother?

Solution

B re n t P i c k e tt b orro w e d ​4000 f ro m hi s b ro t h er D a v e . He a g ree d t o re p a y t h e m o n ey a t t h e e n d o f 2 ​ ye a rs, g i v in g D a v e t h e s am e am o u n t o f in t eres t t ha t h e w o u l d ha v e rece i v e d i f t h e m o n ey ha d b ee n in v es t e d a t 1.25​% co m p o u n d e d q u a r t er l y . Ho w m u c h m o n ey d i d B re n t re p a y hi s ​ b ro t h er ?

Amount : 4101.1

Solution steps

Translate the problem into an equation:

A = 4000 (1 + \frac{0.0125}{4})^{4 \cdot 2}

4000 (1 + \frac{0.0125}{4})^{4 \cdot 2} = 4101.10061 \dots

Round to the nearest hundredth:

4101.1

Amount : 4101.1