Question

. Marcus wants to purchase a home in six years. He will contribute $2500 each year to a savings account with 2.64% interest, compounded semiannually. What is the future value of this investment, when Maurice needs to make a down payment?

Answer 1

Answer: $2926.05

Step-by-step explanation:

Compounded interest follows the formula:

P(1 + r/n)^nt where P = principle, or starting contribution, R = Rate (Percentages converted to decimals), N = number of compounds per year, and T = number of years.

The Principle would be $2500

The Rate would be 2.64% or 0.0264

N would be 2, since it is semiannual

T would be 6, since this lasts 6 years.

When we plug it in, we see

2500(1 + (.0264/2))^(2)(6)

= 2926.053

In a real situation in the bank, they would give you $2926.05