Problema Solution
David Siderski bought a $7,500 bank certificate paying 16% compounded semi-annually. How much money did he get upon cashing in his certificate 3 years later?
Answer provided by our tutors
P = $7,500 the principal
r = 0.16 or 16% annual interest rate
t = 3 years
m = 2 compounding periods per year
i = 0.16/2 = 0.08 interest rate per period
n = 2*3 = 6 total number of compounding periods
A = the future value
A = P(1 + i)^n
A = 7500(1 + 0.08)^6
A = $11,901.56
after 3 years David Siderski got $11,901.56 upon cashing his certificate.