Question

Charlie invests usd 2000 at a nominal annual interest rate of 8% compounded half-yearly. Calculate the value of her investment after 5 years correct to the nearest dollar.

Answer 1

To calculate the value of the investment after 5 years with compound interest, use the formula A = P(1 + r/n)^(nt). Plugging in the values, the investment would be approximately USD 2808.

Step-by-step explanation:

To calculate the value of the investment after 5 years, we can use the formula for compound interest:

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

Where:

• A is the final amount
• P is the principal amount (USD 2000 in this case)
• r is the annual interest rate (8%)
• n is the number of times interest is compounded per year (2 times in this case)
• t is the number of years (5 years in this case)

Plugging in the values, we get:

A = 2000(1 + 0.08/2)^(2*5)

Simplifying the calculation, the value of the investment after 5 years is approximately USD 2808.