Question

Kristen invests $5,000 in a bank. The bank pays 6.45% interest compounded semi-annually. How much money will she have after 2 years, if she makes no additional contributions or withdrawals to the account?

a:5665.80
b:5327.70
c:4375.80
d:5676.88

Answer 1

D. $5,676.88

Explanation:

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

Where

P=principal=$5000

r=interest rate=6.45%=0.0645

n=periods=2(semiannually)

t=time=2 years

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

=5,000(1+0.0645/2)^2*2

=5,000(1+0.03225)^4

=5000(1.03225)^4

=5000(1.13553756247925)

=5,676.8781

Approximately

$5,676.88