Question

A principal of $7,500 is invested in an account paying an annual rate of 5% find the amount in the account after 5 years if the account is compounded semi-annually quarterly and monthly the amount in the account after 5 years if the account is compounded semi-annually is

Answer 1

$9142.46

Explanation:

Use the compounded interest formula:
`A=P(1+(r)/(m) )^(m*t)`

Where

A is the accumulated amount after compounding (our unknown)

P is the principal ($7500 in our case)

r is the interest rate in decimal form (0.05 in our case)

m is the number of compositions per year (2 in our semi-annually case)

and t is the number of years (5 in our case)

`A=P(1+(r)/(m) )^(m*t)= 7500 (1+(0.05)/(2) )^(2*5) =9142.4581996....`

We round the answer to $9142.46