Question

Miles invested $2400 into a retirement account that earns 1.8% interest compounded bimonthly. Write a function to model this situation, then
find the balance of the account after 25 years.

Answer 1

Answer:

(a)$A(n)=P(1+\frac{r}{24})^{24n}$

(b)$3763.31

Step-by-step explanation:

When a Principal, P is invested at an annual rate r, for a period of k times over n years, the Amount, A(t) after n years is given by the model:

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

In this case:

r=1.8%

Since it is compounded bimonthly, k=2X12=24

Therefore:

$A(n)=P(1+\frac{r}{24})^{24n}$

For P=$2400, and n=25 years

$A(25)=2400(1+\frac{0.018}{24})^{24*25}\\A(25)=\ 3763.31$

The balance in the account after 25 years is $3763.31.