Question

An investment of $900 earns 6% annual interest and is compounded semi-annually. Write an equation

to model this situation.

Answer 1

`A=900(1+(0.06)/(2))^(2(t))`

Explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 6% into a decimal:

6% ->
`(6)/(100)` -> 0.06

Since the interest is compounded semi-annually, we will use 2 for n. Lets plug in the values now and your equation will be:

`A=900(1+(0.06)/(2))^(2(t))`