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

Explanation:

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

`A=P(1+(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+(0.06)/(2))^(2*5)=120952.474141\approx 120,953`

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