How much would you have in 10 years if you purchased a $5,000 6-year savings certificate that paid 5% compounded semiannually?
A) $\$ 8,193.08$
B) $\$ 6,724.44$
C) $\$ 11,018.78$
D) $\$ 8,051.62$
E) $\$ 6,734.28$

Question

Quizplus · Accepted Answer

First, we need to determine the interest rate per compounding period. Since the savings certificate pays 5% compounded semiannually, we divide the annual interest rate of 5% by 2 to get 2.5% interest rate per compounding period.

Next, we need to determine the number of compounding periods over the 6-year term of the savings certificate. Since the interest is compounded semiannually, there will be 2 compounding periods per year, and a total of 12 compounding periods over the 6-year term.

Using the formula for compound interest, we can calculate the future value of the $5,000 savings certificate after 10 years as follows:

$5,000 x (1 + 0.025)^12 x 10 = $8,193.08

Therefore, the best choice is A.

How Much Would You Have in 10 Years If You $8,193.08\$ 8,193.08$8,193.08

How Much Would You Have in 10 Years If You $\$ 8,193.08$