Question

Use the formula for compound amount:$14,800 at 6% compounded semiannually for 4 years

Answer 1

SOLUTION

Given the question in the question tab, the following are the solution steps to answer the question.

STEP 1: Write the formula for calculating compound amount

$A=P(1+\frac{r}{n})^{nt}$

where

A = final compounded amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

STEP 2: Write the given data

Semiannually means that n will be 2

$P=14,800,r=\frac{6}{100}=0.06,n=2,t=4$

STEP 3: Calculate the compound amount

$\begin{gathered} A=14800(1+\frac{0.06}{2})^{2\times4}\Rightarrow A=14800(1+0.03)^{2\times4} \\ A=14800(1.03)^8 \\ A=14800\times1.266770081 \\ A=\text{\ }18,748.1972 \end{gathered}$

Hence, the compounded amount after 4 years is $18,748.1972