Question

a person deposits $5000 in an account paying 2.5%, compounded semiannually. Find the amount in the account after 4.5 years

Answer 1

Answer:

$5,591.46

Step-by-step explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 2.5% into a decimal:

2.5% -> $\frac{2.5}{100}$ -> 0.025

Since the interest is compounded semiannually, we will use 2 for n. Lets plug in the values now:

$A=5,000(1+\frac{0.025}{2})^{2(4.5)}$

$A=5,591.46$

The amount in the account after 4.5 years is $5,591.46