Question

I dont quite understand this question, it talk about interest rate

Answer 1

The compound interest formula is given to be:

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

where

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

From the question, the final expected amount is given to be $15,000. The time is 10 years, and the interest rate is 6%. The value of n is 2 for a semi-annual compounding period. Therefore, we have the following parameters:

`\begin{gathered} A=15,000 \\ r=(6)/(100)=0.06 \\ n=2 \\ t=10 \end{gathered}`

Therefore, we can solve as follows:

`\begin{gathered} 15000=P(1+(0.06)/(2))^(2*10) \\ 15000=P(1+0.03)^(20) \\ 15000=P(1.03)^(20) \\ P=(15000)/(1.03^(20)) \\ P=8305.14 \end{gathered}`

Given the cost of the purchase to be $8,305.14, we can share this among the three of them. Therefore, each of them will contribute:

`\Rightarrow(8305.14)/(3)=2768.38`

Each of them will contribute $2,768.38.