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 5 years

Answer 1

`\text{ 33,597.91 Yuan}`

Step-by-step explanation:

Here, we want to get the balance in the account after 5 years

To do this, we use the compound interest formula

Mathematically, we have this as:

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

where A is the account balance after 5 years

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 compounding takes place yearly (since it is semi-annually, it takes place 2 times per year)

t is the number of years in which we would have compounding

Substituting the values, we have it that:

`\begin{gathered} A\text{ = 25,000( 1+ }(0.06)/(2))^(10) \\ A\text{ = 33,597.91 Yuan} \end{gathered}`