Question

Sam Monte deposits $21,500 into Legal Bank, which pays 6% interest that is compounded semiannually. Using the table in the handbook, what will Sam have in his account at the end of six years?

Answer 1

y= 21,500(1+0.06) to the 6th power and it equals 30,498.16

Answer 2

Compound growth formula is given as:

$P=P_{0}(1+\frac{r}{n})^{nt}$

Where,

• P is the future value after some time
• $P_{0}$ is the initial deposit
• r is the annual rate of interest
• n is the number of time compounding happens ( n = 1 for annual compounding, n = 2 for semi-annual compounding, n = 4 for quarterly compounding etc.)
• t is time in years

Given is P = $21,500, r = 6% or 0.06, n = 2 (since semi-annual compounding), and t is 6.

Putting all these into formula and solving for P gives us Sam's balance at end of 6 years.

$P=21,500(1+\frac{0.06}{2})^{(2)(6)}\\P=21,500(1+0.03)^{12}\\P=21,500(1.03)^{12}\\P=30,653.86$

Sam will have $30,653.86 at end of 6 years in his account.

ANSWER: $30,653.86