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Eduardo decided to invest money in an account that earns 3% compounded semi-annually. If he initially

deposited $750 into the account, how much will it be worth in 8 years? Round answer to the nearest
hundredth.

1 Answer

7 votes

Answer:

$951.74

Explanation:

You want the future value of $750 earning 3% per year for 8 years, compounded semi-annually.

Compound interest

The value of an account earning interest at rate r on principal P compounded n times per year for t years is ...

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

For P=750, r=0.03, n=2, t=8, this is ...

A = 750(1 +0.03/2)^(2·8) = 750(1.015^16) ≈ 951.74

The account will be worth about $951.74 in 8 years.

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Additional comment

All spreadsheets and many graphing calculators have the necessary financial functions for computing this value. Apps are available for the purpose, as well.

Eduardo decided to invest money in an account that earns 3% compounded semi-annually-example-1
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