A loan of $10,000 is taken at an annual interest rate of 7%, compounded annually. What will be the total amount owed after 5 years?

Mon, 04 May 2026 17:43:13 +0000

**A loan of $10,000 is taken at an annual interest rate of 7%, compounded annually. What will be the total amount owed after 5 years?** When early financial goals push people to consider borrowing—like funding education, starting a side business, or managing temporary cash shortages—understanding how interest shapes the final cost remains essential. A loan of $10,000 at 7% annual interest, compounded yearly, offers a clear baseline for planning. After five years, careful calculation reveals the true compound impact—not just the sum, but the growing weight of interest. This is not just math; it’s transparency in financial growth, crucial for US consumers navigating credit options today. **Why This Loan Term Is Gaining Attention in the U.S.**
Interest rates like 7% reflect broader economic currents—low to moderate levels stimulating borrowing while balancing affordability. With inflation moderating and wage growth steady, consumers are reassessing credit as a strategic tool, not a quick fix. This loan—small in size but significant in long-term impact—mirrors common scenarios where people weigh immediate needs against future cost. In a mobile-first, data-driven market, users increasingly seek clear, reliable projections to inform real, informed decisions, making this calculation a practical touchpoint. **How This Loan Actually Works—Step by Step**
Compound interest builds over time: each year, interest is calculated on both the original principal and accumulated interest. For a $10,000 loan at 7% compounded annually, the total owed after 5 years follows the formula:
Principal × (1 + rate)^years
So: $10,000 × (1 + 0.07)^5 = $10,000 × (1.07)^5
Calculating step-by-step:
Year 1: $10,000 × 1.07 = $10,700
Year 2: $10,700 × 1.07 = $11,449
Year 3: $11,449 × 1.07 ≈ $12,250.43
Year 4: $12,250.43 × 1.07 ≈ $13,107.96
Year 5: $13,107.96 × 1.07 ≈ $14,025.52