Question

If $5,000 is borrowed with an interest of 12.3% compounded semi-annually, what is the total amount of money needed to pay it back in 3 years?
Round your answer to the nearest cent.

Do NOT round until you have calculated the final answer.

Answer 1

Answer:

$7153.03

Step-by-step explanation:

To find the total amount after 3 years, we can use the formula for compound tax:

P = Po * (1+r/n)^(t*n)

where P is the final value, Po is the inicial value, r is the rate, t is the amount of time and n depends on how the tax is compounded (in this case, it is semi-annually, so n = 2)

For our problem, we have that Po = 5000, r = 12.3% = 0.123, t = 3 years and n = 2, then we can calculate P:

P = 5000 * (1 + 0.123/2)^(3*2)

P = 5000 * (1 + 0.0615)^6

P = $7153.029

Rounding to the nearest cent, we have P = $7153.03