Question

10. You have just deposited $1000 in an unusual bank account that pays interest biannually (once every 2 years). If the 2-year interest rate is 8% (total interest over 2 years is 8%, not 8% per year), how much will you have in the account after 6 years? (Answer: $1,259.71)

Answer 1

FV= $1,259.71

Step-by-step explanation:

Giving the following information:

Initial deposit (PV)= $1,000

Number of periods (n)= 3 biannual years

Interest rate (i)= 8% = 0.08

To calculate the future value (FV), we need to use the following formula:

FV= PV*(1+i)^n

FV= 1,000*(1.08^3)

FV= $1,259.71