Question

Compute the amount in an account after 4 years if $4550 is invested at an annual interest rate of 3.5% compounded semiannually. Round to two decimals.

Answer 1

$5,227.41

Explanation:

The compound interest formula is

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

A is the final amount

P is the initial amount

r is the interest rate as a decimal

n is the # of times the interest is applied per time period

t is the # of time periods.

We are given

Note: semi annually is twice per year.

`P=4550`

`r=0.035`

`n=2`

`t=4`

Lets solve for A.

`A=4550(1+(0.035)/(2) )^(2*4)`

`A=4550(1.0175)^(8)`

`A=4550(1.14888178)`

`A=5227.41211244`

Round to two decimals.

$5,227.41