Question

Cindy invests $10000 in an account that pays an annual rate of 3.96%, compounding semi-annually. approximately how much does she have in her account after two years?

Answer 1

Annual Compound Formula is:

A = P( 1 + r/n) ^nt

Where:

A is the future value of the investment

P is the principal investment

r is the annual interest rate

n is the number of  interest compounded per year

t is the number of years the money is invested

So for the given problem:

P = $10,000

r = 0.0396

n = 2 since it is semi-annual

t = 2 years

 

Solution:

A = P( 1 + r/n) ^nt

A = $10,000 ( 1 + 0.0396/2) ^ (2)(2)

A = $10000 (1.00815834432633616)

A = $10,815.83 is the amount after two years