suppose that a loan of $7000 is given at an interest rate of 4% compounded each year. assume that no…

Explanation:

Step1: Recall compound - interest formula

The compound - interest formula is $A = P(1 + r)^n$, where $P$ is the principal amount, $r$ is the annual interest rate (as a decimal), and $n$ is the number of years. Here, $P=$7000$, $r = 0.04$.

Step2: Calculate amount owed at the end of 1 year

For $n = 1$, substitute into the formula: $A_1=7000\times(1 + 0.04)^1=7000\times1.04 = 7280$.

Step3: Calculate amount owed at the end of 2 years

For $n = 2$, substitute into the formula: $A_2=7000\times(1 + 0.04)^2=7000\times1.04^2=7000\times1.0816 = 7571.2$.

Answer:

(a) $7280 (b) $7571.2