The amount of lump sum that has to be repaid in 4 years is calculated using the future value formula as shown below:
FV = PV*(1+r)^n where
PV = Present value = 9,500
r = interest rate = 8.9% = 0.089
n = time in years = 4
FV = 9,500*(1+0.089)^4
FV = 9500*1.089^4
FV = $13,360.88
The amount that you have to repay in lump sum after four years = $13,360.88 (Rounded to 2 decimals)
Lump sum can b said as the total amount in bulk instead of making several smaller amount payments.
Compound interest is calculated by using the principle amount as well as the interest earn on the principle amount accumulated over the period of time.
Given,
Principle amount is $9,500
Interest rate is 8.9%
we have to calculate the amount after 4 years
[tex]\begin{aligned} \rm Amount &= P(1 + r)^n\\Amount&= \$9500(1+0.089)^4\\Amount&= \$9500 \times 1.4064\\Amount&= \$13360.88\end[/tex]
Therefore, the repayment lump-sum amount after 4 years on principle of $9,500 at a interest rate of 8.9% compounded annually is $13,360.88.
Learn more about Lump-sum here:
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