Question

Brenda invests $4,848 in a savings account with a fixed annual interest rate of 5% compounded 2 times per year. What will the account balance be after 6 years?

Answer 1

She invests some amount in a saving account of fixed interest compounded half-yearly. It says to find its Future Value after six years.

The principal amount is P = $4,848.

Annual interest rate is 5% i.e. r = 0.05

Compounding period is two times per year i.e. n = 2.

Time of investment is t = 6 years.

We know the formula of Future Value is given by :-

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

We can plug the given values in the formula to calculate the answer.

$FV = 4848*(1+\frac{0.05}{2})^{(2*6)} \\\\ FV = 4848*(1+0.025)^{(12)} \\\\ FV = 4848*(1.025)^{(12)} \\\\ FV = 4848*(1.344888) \\\\ FV = 6520.02102$

Hence, future value of investment after six years is 6,520.02 dollars.