Question

Bill Jensen deposits $8500 with Bank of America in an investment paying 5% compounded semiannually. Find the compound amount in 6 years

Answer 1

Given:

Initial deposit = $8500

rate of interest = 5% compounded annuallly

time (t) = 6 years

If Ao is invested at an annual interest rate r and compounded semiannually, the amount At after t years is given by the formula:

`A_t\text{ = }A_0(1\text{ + }(r)/(2))^(2t)`

The compound amount in 6 years:

`A_t\text{ = 8500 }*\text{ (1 + }(0.05)/(2))^(2*6)`

Simplifying we have:

`\begin{gathered} A_t\text{ = 8500 }*1.025^(12) \\ =\text{ 11431.56} \end{gathered}`

Answer:

$11431.56