Question

Dara invests $800 at 12.5% per

Answer 1

Answer:

By the end of the first year Dara will have $903.125 in his account.

Step-by-step explanation:

Since this a compounded interest formula, it means that the amount invested grows exponentially overtime. In order to calculate the total of money over a period of time we must use the following formula:

M(t) = M(0)*(1 + r/n)^(n*t)

Where M(t) is the amount of money in "t" years, M(0) is the amount invested, r is the anual interest rate, n is the compound period over a year and t is the time elapsed in years.

In this problem the amount is compounded half-yearly, this means that for every year that passes the money is compounded twice, therefore n is equal to 2. Applying the data from the problem to the formula, we have:

M(1) = 800*(1 + 0.125/2)^(2*1)

M(1) = 800*(1.0625)^(2)

M(1) = 800*(1.0625)^(2) =903.125

By the end of the first year Dara will have $903.125 in his account.