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Rob invests $2,856 in a retirement account with a fixed annual interest rate of 5% compounded 2 times per year. What will the account balance be after 13 years?

User Isherwood
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1 Answer

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Final answer:

The account balance in Rob's retirement account after 13 years, given a 5% annual interest rate compounded semiannually, would be approximately $5,987.23.

Step-by-step explanation:

To find out what the account balance will be after 13 years when Rob invests $2,856 in a retirement account with a fixed annual interest rate of 5% compounded 2 times per year, we can use the compound interest formula:


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

Where:

  • A = the amount of money accumulated after n years, including interest.
  • P = the principal amount (the initial amount of money).
  • r = the annual interest rate (decimal).
  • n = the number of times that interest is compounded per year.
  • t = the time the money is invested for in years.

Based on Rob's investment:

  • P = $2,856
  • r = 0.05 (5% as a decimal)
  • n = 2 (since the interest is compounded semiannually)
  • t = 13 years

Substitute these values into the formula:

A = 2856(1 + 0.05/2)(2*13)

Calculate the values inside the parentheses and the exponent:

A = 2856(1 + 0.025)26

A = 2856(1.025)26

Using a calculator, we raise 1.025 to the 26th power and multiply the result by $2,856:

A ≈ 2856 * 1.02526

A ≈ 2856 * 2.09659023431

Now multiply 2,856 by approximately 2.0966:

A ≈ 5987.23

After 13 years, the account balance would be approximately $5,987.23.