Question

Assume ABC Company deposits $90,000 with First National Bank in an account earning interest at 6% per annum, compounded and semi-annually. How much will the ABC have in the account after five years if interest is reinvested?
A) $120,953
B) $90,000
C) $117,000
D) $120,442

Answer 1

Answer: A) $120,953

Step-by-step explanation:

The formula to calculate the compound amount (semi-annually):-

$A=P(1+\dfrac{r}{2})^{2n}$, where P is principal amount , r is rate of interest and n is the number of time periods.

Given : Principal amount : P= $90,000

Rate of interest : 6% per annum = 0.06 per annum

Time period : n= 5 years

$A=(90000)(1+\dfrac{0.06}{2})^{2\times5}=120952.474141\approx 120,953$

Hence, the ABC will have $ 120,953 in the account after five years if interest is reinvested.