Sam Monte deposits $21,500 into Legal Bank, which pays 6% interest that is compounded semiannually. Using the table in the handbook, what will Sam have in his account at the end of six years?

Question

Quizplus · Accepted Answer

To calculate the future value of Sam's deposit, we use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($21,500), r is the annual interest rate (6% or 0.06), n is the number of times that interest is compounded per year (semiannually, so n=2), and t is the time the money is invested for in years (6 years). Plugging in the values: A = $21,500(1 + 0.06/2)^(2*6) = $30,654.70.

Sam Monte Deposits $21,500 into Legal Bank, Which Pays 6