Question

How much interest in dollars is earned in 5 years on $8,200 deposited in an account paying 6% interest compounded semiannually round to the nearest cent

Answer 1

Using compound interest formula:

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

Where:

A = Amount

P = Principal = 8200

r = Interest rate = 6% = 0.06

n = Number of times interest is compounded per year = 2

t = time = 5

so:

`\begin{gathered} A=8200(1+(0.06)/(2))^(2\cdot5) \\ A=11020.11 \end{gathered}`

Therefore, the interest is the amount minus the amount invested:

`\begin{gathered} I=A-P \\ I=11020.11-8200 \\ I=2820.11 \end{gathered}`

Answer:

$2820.11