In order to help pay for college, the grandparents of a child invest $850 in a bond that pays 15%
Interest compounded semiannually. How much money will there be in 7.5 years?
A)$2,494.80
B)$2,565.55
C)$2,515.05
D)$2,615.17

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where: 
A = the amount of money at the end of the investment period 
P = the principal amount (which is $850) 
r = the annual interest rate (which is 15%) 
n = the number of times the interest is compounded per year (which is 2 since it is compounded semiannually) 
t = the time period of the investment (which is 7.5 years)

Plugging in the values, we get:

A = 850(1 + 0.15/2)^(2*7.5)

A = 850(1.075)^15

A = 850(2.51505)

A = $2,141.79

Therefore, the total amount of money at the end of 7.5 years is $2,141.79.

In Order to Help Pay for College, the Grandparents of a Child