Question

Jimmy invests $4,000 in an account that pays 5% annual interest, compounded semiannually. What is his balance at the end of 10 years?

Answer 1

Answer:

The balance after the end of 10 years is $6,554.47

Explanation:

The amount after t years is given as:

$A=P(1+\frac{r}{n})^{nt}$

Principal, P = $4000

Interest rate, r = 5% = 5/100 = 0.05

Number of times compounded annually, n = 2

Time, t = 10 years

$\begin{gathered} A=4000(1+\frac{0.05}{2})^{2\times10} \\ \\ =4000(1.025)^{20} \\ \\ =6554.47 \end{gathered}$

The balance after the end of 10 years is $6,554.47