Question

You deposit $2000 in an account that pays 7% interest compounded semiannually. After 5 years, the interest rate is increased to 7.28% compounded quarterly. What will be the value of the account after a total of 10 years?

The value of the account will be $_____. (Round to the nearest dollar as needed.)

Answer 1

9514 1404 393

Answer:

$4047

Explanation:

For an interest rate r compounded n times per year for t years, the effective multiplier is ...

(1 +r/n)^(nt)

The multiplier for the first 5 years is ...

(1 +0.07/2)^(2·5) = 1.41059876

The multiplier for the last 5 years is ...

(1 +0.0728/4)^(4·5) = 1.43437218

Then the account value at the end of 10 years is ...

$2000(1.41059876)(1.43437218) ≈ $4047 . . . . balance after 10 years