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 balance in the account after 4 years

Answer 1

`A\text{ = 31,669.25 Yuan}`

Step-by-step explanation:

Here, we want to get the balance in the account after 4 years

Mathematically, we use the compound interest formula to get this:

`A\text{ = P(1 +}(r)/(n))^(nt)`

where A is t6he account balance after the tenor

P is the amount deposited which is 25,000 yuan

r is the interest rate which is 6% = 6/100 = 0.06

n is the number of times interest is compounded yearly. Since it is semi-annual, then it is 2 times

n is the number of years which is 4

We proceed to substitute the values into the equation above as follows:

`\begin{gathered} A\text{ = 25000(1 + }(0.06)/(2))^8 \\ A\text{ = 31,669.25 Yuan} \end{gathered}`