To calculate the compound interest on a loan of K6,000 with a 12% interest rate over two years, you can use the formula for compound interest:
1. First, determine the annual interest rate as a decimal. In this case, 12% is 0.12 when converted to a decimal.
2. Next, calculate the interest for the first year by multiplying the principal amount (K6,000) by the annual interest rate (0.12): K6,000 x 0.12 = K720.
3. Add this interest to the principal amount to get the new total after the first year: K6,000 + K720 = K6,720.
4. Repeat the process for the second year. Calculate the interest on K6,720 for the second year: K6,720 x 0.12 = K806.40.
5. Add this interest to the total after the first year to find the final amount after two years: K6,720 + K806.40 = K7,526.40.
6. Therefore, the compound interest on a loan of K6,000 with a 12% interest rate over two years would be K7,526.40.
