Assume ABC Company deposits $25,000 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 the investment can be calculated using the formula for compound interest: FV = P(1 + r/n)^(nt), where P is the principal amount ($25,000), r is the annual interest rate (0.06), n is the number of times interest is compounded per year (2), and t is the number of years (5). Plugging in the values, FV = 25000(1 + 0.06/2)^(2*5) = 25000(1.03)^10 ≈ $33,598.

Assume ABC Company Deposits $25,000 with First National Bank in an Account