Assume ABC Company deposits $70,000 with First National Bank in an account earning interest at 6% per annum, compounded semi-annually. How much will ABC have in the account after five years if interest is reinvested?

Question

Quizplus · Accepted Answer

The future value of an investment compounded semi-annually is calculated using the formula A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. Plugging in the values: A = $70,000(1 + 0.06/2)^(2*5) = $70,000(1 + 0.03)^(10) = $70,000(1.03)^10 ≈ $94,074.

Assume ABC Company Deposits $70,000 with First National Bank in an Account