Question

You invest $720 in an account that has an annual interest rate of 6.2%, compounded semiannually. How much money will be in the account after 5 years? Round your answer to the nearest whole number and include units.

Show all work.

Answer 1

The appropriate formula is
A = P(1 +r/n)^(nt)
where P is the amount invested (720)
r is the annual interest rate (0.062)
n is the number of compoundings per year (2)
t is the number of years (5)

Filling in the given numbers, you have
A = $720·(1 + .062/2)^(2·5)
A = $720·1.031^10
A ≈ $977

After 5 years the account will hold $977.