Question

Lea invests $8,333 in a savings account with a fixed annual interest rate of %8 compounded 2 times per year. What will the account balance be after 12 years?

Answer 1

Total = Principal * (1 + rate/n)^n*years
Total = 8,333 * (1 + .08/2) ^ 2*12
Total = 8,333 * (1 + .04)^24
Total = 8,333 * 2.5633041649
Total = 21,360.01

Answer 2

$21,360.01

Explanation:

Formula for compound interest :

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

A = Future amount

P = Principal amount ( $8,333)

r = rate of interest 8% (0.08)

n = number of compounding in a year (2)

t = time in years (12)

`A=8,333(1+(0.08)/(2))^((2)(12))`

`A=8,333(1+0.04)^((24))`

`A=8,333(1.04)^((24))`

A = 8,333(2.56330416)

A = 21,360.0136 ≈ $21,360.01

The account balance would be $21,360.01 after 12 years.