Question

Suppose $5,500 is placed in a saving account, how much money would be in thesaving account after 5 years if#7 the compounds interest semiannually at a rate of 5% per year.

Answer 1

For this problem we can use the compund interest formula given by:

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

Where

A= the future value, P = present value, r= rate of interest, n the number of times that the rate is compounded in a year and t the number of years.

For this particular problem A=5500, r=0.05, n=2 (since the rate is semiannually), t=5 years.

If we replace in the formula we got:

`A=5500(1+(0.05)/(2))^(2\cdot5)=5500(1.025)^(10)=7040.46`