Question

Sue invested $1,000 at an interest rate of 4% compounded semiannually. How much money

would she have in 3 years?

Answer 1

She would have $1,126.16 in 3 years.

Explanation:

Compound interest:

The compound interest formula is given by:

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

Where A(t) is the amount of money after t years, 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 year and t is the time in years for which the money is invested or borrowed.

In this question:

Invested 1000, which means that
`P = 1000`.

Interest of 4%, so
`r = 0.04`

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

How much money would she have in 3 years?

This is A(3).

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

`A(3) = 1000(1 + (0.04)/(2))^(6) = 1,126.16`

She would have $1,126.16 in 3 years.