Problema Solution
$8000 is made into an account that earns 10% annual interest compounded semiannually. What is the value of the investment after 5 years?
Answer provided by our tutors
A = the future value after t = 5 years
P = $8,000 principal amount (initial investment)
r = 0.10 or 10% annual nominal interest rate
n = 2 number of times the interest is compounded per year
t = 5 years number of years the money is invested
The formula for A is:
A = P (1 + (r/n))^ (n*t)
A = 8000(1 + 0.10/2)^(5*2)
A = $13,031.157
The value of the investment after 5 years is $13.031.157.