Answer:
The answers to the question are
a) The balance of account at end of period $4515.278
b) The interest earned $2515.278
c) The effective rate of interest is 0.0609 or 6.09 %
Step-by-step explanation:
To solve the question
a) Here we have the compound interest formula given by
Where,
P = Initial investment = $2500
r = Annual interest rate = 6% =0.06
n = Number of compounding periods per year = 2
t = Number of years 10
From which we have
= $4515.278
The balance of account at end of period $4515.278
b) Interest earned = Balance - initial investment = $4515.278 - $2500 = $2515.278
c)
The effective interest rate is the interest rate that accrues to an investment or loan as a result of the compounding the interest for a given time period of time. It is also known as the effective annual interest rate
The effective rate of interest is given by
Effective rate = Where
r = Annual interest rate
n = Number of annual compounding periods
this gives = 0.0609 = 6.09 %