Question

Suppose that $2000 is loaned at a rate of 11%, compounded semiannually. Assuming that no payments are made, find the amount owed after 5 years.

Do not round any intermediate computations, and round your answer to the nearest cent.

Answer 1

The final value owed will be $3416.29.

Explanation:

Since this is a compound interest problem we should use the apropriate formula given bellow:

M = C*(1 + r/n)^(n*t)

Where M is the final amount, C is the initial amount, r is the interest rate, t is the total time and n is the rate at which it is compounded. Since it's semiannually the value of n is 2 and we can use the formula to find the desired value.

M = 2000*(1 + 0.11/2)^(2*5)

M = 2000*(2/2 + 0.11/2)^(10)

M = 2000*(2.11/2)^(10)

M = 3416.29

The final value owed will be $3416.29.