Question

Pierre deposits $9,000 in a certificate of deposit that pays 1.4% interest, compounded semi-annually.

Answer 1

9514 1404 393

Answer:

• interest: $63
• balance: $9063

Step-by-step explanation:

After 6 months, the interest accrued is ...

  I = Prt

  I = $9000·0.014·(6/12) = $63

This is added to the principal to get the balance at that point in time.

  $9000 +63 = $9063

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The interest earned in the first 6 months is $63. The balance after 6 months is $9063.

_____

The compound interest formula will give you the same result for one compounding period. It tells you the balance is ...

  A = P(1 +r/n)^(nt)

where n is the number of times interest is compounded in a year (2), and t is the number of years (1/2). For annual rate r = 1.4%, this is ...

  A = $9000(1 +0.007)^(2×1/2) = $9000·1.007 = $9063