Question

Assume ABC Company deposits $90,000 with First National Bank in an account earning interest at 6% per annum, compounded semi-annually. How much will ABC have in the account after five years if interest is reinvested?

Answer 1

Explanation:

I'm goig to assume that the formula we need here is the following:

`A(t)=P(1+(r)/(n))^{(n)(t)`

where A(t) is the amount in the account after the compounding is done, n is the number of times per year the compounding occurs, r is the rate in decimal form, and t is the time in years. Filling in accordingly,

`A(t)=90000(1+(.06)/(2))^((2)(5))` and simplifying a bit,

`A(t)=90000(1.03)^(10)` and simplifying a bit more,

A(t) = 90000(1.343916379) so

the amount in the account after 5 years is

A(t) = 120,952.47