Statement Problem: Suppose that you have a savings account with 8500 in it. it pays 7% interest compound as shown below. find the value for the next 4 years semiannually.
Solution:
The compound interest formula is;
[tex]\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \text{Where;} \\ A=\text{final amount} \\ P=\text{initial savings balance} \\ r=\text{interest rate} \\ n=number\text{ of times interest applied per time period} \\ t=number\text{ of times period elapsed} \end{gathered}[/tex]Thus, the parameters given are;
[tex]P=8,500,r=0.07,n=2,t=4,A=?[/tex]Then, the amount is;
[tex]\begin{gathered} A=8,500(1+\frac{0.07}{2})^{2(4)} \\ A=8500(1.035)^8 \\ A=8500(1.3168) \\ A=11192.88 \end{gathered}[/tex]Hence, the amount is 11,192.88.
