Question

Chi Tang, a business person from Taiwan, deposits 25,000 yuan in a mutual fund with bonds managed by Bank of America that is expected to pay 6% compounded semiannually. Find the interest after 5 years.

Answer 1

Given:

`\begin{gathered} P=25,000\text{yuan} \\ r=6\text{ \%}=(6)/(100)=0.06 \\ t=5\text{years} \\ n=2 \end{gathered}`

To find the amount, we use the formula below;

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

Substituting the given values into the formula;

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ A=25000(1+(0.06)/(2))^(2*5) \\ A=25000(1+0.03)^(10) \\ A=25000(1.03)^(10) \\ A=25000*1.03^(10) \\ A=\text{ 33,597.91 Yuan} \end{gathered}`

Hence, to find the interest after 5years,

`\begin{gathered} \text{Amount}=\text{principal+interest} \\ \text{Interest}=\text{amount}-\text{principal} \\ \text{Interest}=33597.91-25000 \\ \text{Interest}=8597.91\text{ Yuan} \end{gathered}`

Therefore, the interest after 5years is 8,597.91 Yuan