Question

Suppose that $2000 is invested at a rate of 2.6% , compounded semiannually. Assuming that no withdrawals are made, find the total amount after 10 years.

Answer 1

$2,589.52

Explanation:

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

We start with the compound interest formula above, where

A = future value

P = principal amount invested

r = annual rate of interest written as a decimal

n = number of times interest is compound per year

t = number of years

For this problem, we have

P = 2000

r = 0.026

n = 2

t = 10,

and we find A.

`A = $2000(1 + (0.026)/(2))^(2 * 10)`

`A = $2589.52`

Answer 2

Compound interest formula:

Total = principal x ( 1 + interest rate/compound) ^ (compounds x years)

Total = 2000 x 1+ 0.026/2^20

Total = $2,589.52