Question

Find the balance of $7,000 deposited at 4% compounded semi-annually for 2 years

Answer 1

The balance will be $7,577.03.

Explanation:

The compound interest formula is given by:

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

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this problem, we have that:

`P = 7000, r = 0.04`

Semianually means twice a year, so
`n = 2`

We want to find A when
`t = 2`.

So

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

`A = 7000(1 + (0.04)/(2))^(2*2)`

`A = 7577.03`

The balance will be $7,577.03.