Question

If $5,000 is invested at 3.2% annual interest compounded semiannually, how much will the investment be worth in 10 years? Drag and drop each value into the correct location in the Compound Interest equation. Note: Not all quantities will be used.

Answer 1

Given:

Principal = $5,000

Rate of interest = 3.2% annual interest compounded semiannually.

Time = 10 years.

To find:

The amount after compound interest.

Solution:

The formula for amount is:

$A=P\left(1+\dfrac{r}{100n}\right)^{nt}$

Where, P is principal, r is rate of interest, n is number of times interest compounded and t is the number of years.

Putting P=5000, r=3.2, t=10, n=2, we get

$A=5000\left(1+\dfrac{3.2}{100(2)}\right)^{2(10)}$

$A=5000\left(1+0.016\right)^{20}$

$A=5000\left(1.016\right)^{20}$

$A=5000(1.37364389)$

On further simplification, we get

$A=6868.21945$

$A\approx 6868.22$

Therefore, the amount after compound interest is $6868.22.