Question

Shandra's parents put $1,500 in her bank account for college tuition. At an interest rate

of 8.25% compounded semiannually, what will be the balance after 18 years?

Answer 1

$6,427.99

Explanation:

-We first find the effective annual interest rate as follows:

`i_m=(1+i/m)^m-1\\\\=(1+0.0825/2)^2-1\\\\=0.084202`

#We the use this rate to find the compounded amount after 18 years:

`A=P(1+i_m)^n\\\\=1500(1.084202)^(18)\\\\=6427.99`

Hence, the amount after 18 years is $6,427.99