Question

Kristen invests $5,000 in a bank. The bank pays 6.45% interest compounded semi-annually. How much money will she have after 2 years, if she makes no additional contributions or withdrawals to the account?

Answer 1

Answer:  $5,676.87

Step-by-step explanation:

Hi, to answer this question we have to apply the compounded interest formula:  

A = P (1 + r/n) nt  

Where:  

A = Future value of investment (principal + interest)  

P = Principal Amount  

r = Nominal Interest Rate (decimal form, 6.45/100= 0.0645)  

n= number of compounding periods in each year (2)  

Replacing with the values given  

A = 5,000 (1+ 0.0645/2)^ (2x2)

A = 5,000 (1.03225)^4

A = $5,676.87