Question

Maria invests $6,931 in a savings account with a fixed annual interest rate of 6% compounded 2 times per year. What will the account balance be after 4 years?

Answer 1

Account balance after 4years = $8,779.98

Explanation:

To find the account balance after 4years,

We apply the compound interest formula:.

I.e:

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

Where

A = Account balance

P = principal (investment)

r = interest rate

n = number of times compounded in a year

t = time ( in years)

In this case

A = ?

P = $6,931

r = 6%

n = 2 ( two times per year)

t = 4years

Therefore

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

A = 6,931 (1+0.06/2)^(2*4)

A = 6,931 (1+0.03)^8

A = 6,931 (1.03)^8

A = 6,931 (1.2668)

A = $8,779.98