Question

Your aunt is planning to invest in a bank CD that will pay 10.0 percent interest semiannually. If she has $6,000 to invest, how much will she have at the end of four years? (Round your answer to the nearest penny.)

Answer 1

8864.73

Explanation:

Given that your aunt is planning to invest in a bank CD that will pay 10.0 percent interest semiannually.

Effective rate =
`(10)/(200) =0.05` (since 1 year has 2 half years)

No of half years
`= 4(2) =8`

Final amount when compounded semi annually

=
`P(1+(r)/(200) )^(nt)`

Here n = 4years t = no of half years per year = 2

Substitute to get

Final amount

=
`6000(1.05)^(8) \\=8864.73`