Question

You deposit $3000 into a bank account that pays 1.25% annual interest, compounded semi-annually. What is the final balance after 4 years

Answer 1

The final balance after 4 years is approximately $3143.70.

Step-by-step explanation:

To calculate the final balance after 4 years, we can use the formula for compound interest:

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

Where:

• A is the final balance
• P is the initial deposit ($3000)
• r is the annual interest rate (1.25% or 0.0125)
• n is the number of times interest is compounded per year (2 for semi-annually)
• t is the number of years (4)

Substituting the values into the formula, we have:

A = 3000(1 + 0.0125/2)⁽²ˣ⁴⁾

A = 3000*1.0125⁸

A= $3143.70

Simplifying this expression, the final balance is approximately $3143.70.

Answer 2

$3,153.32

Step-by-step explanation:

Given that

The deposited amount is $3,000

The annual interest rate is 1.25%

So, the semi-annual interest rate is 1.25% ÷2 = 0.625%

And, the time period = 4 × 2 = 8

We need to find out the final balance

So,

As we know that

Future value = Present value × (1 + rate of interest)^number of years

= $3,000 × (1 + 0.625%)^8

= $3,153.32