Question

If Max is opening a bank account and he deposits $1500 and it has compound interest at a 9%, how much money will he have 8 years if the interest compounds semi-annually?

Answer 1

$3,033.56

Explanation:

(see attached for reference)

The formula for compound interest is given by

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

Where,

A = final amount (we are asked to find this)

P = principal = given as $1500

r = annual interest rate = 9% = 0.09

n = 2 (for compounding semi-annually)

t = time, given as 8 years

Substituting the above into the equation:

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

A = 1500 [ 1 + (0.09/2) ]^[(2)(8)]

A = 1500 [ 1.045) ]^[16]

A = $3,033.56