Question

On Melissa's 6th birthday, she gets a $2000 CD that earns 3% interest,

compounded semiannually. If the CD matures on her 13th birthday, how much

money will be available?

Answer 1

Answer:

$ 2463.51 will be available.

Step-by-step explanation:

Since, the amount formula in compound interest,

$A = P(1+\frac{r}{n})^{nt}$

Where,

P = principal amount,

r = annual interest,

n = number of compounding periods,

t = number of years

We have,

P = $ 2000,

r = 3% = 0.03,

Number of years from 6th birthday to 13th birthday , t = 7 years,

n = 2 ( semiannual in a year ),

Hence, the final amount of CD,

$A=2000(1+\frac{0.03}{2})^{14}$

$= 2000(1+0.015)^{14}$

$=2000(1.015)^{14}$

$\approx \ 2463.51$