Question

Sharon Nguyen has $25,000 to invest and believes that she can earn 6% compounded semiannually. Find the compound amount if she invests for 10 years

Answer 1

In order to calculate the compound amount, we can use the formula below:

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

Where A is the amount after t years, P is the principal (initial amount), r is the interest rate and n is how many times the interest is compounded in a year.

So, for P = 25000, r = 0.06, t = 10 and n = 2, we have:

$\begin{gathered} A=25000\cdot(1+\frac{0.06}{2})^{2\cdot10} \\ A=25000(1.03)^{20} \\ A=45152.78 \end{gathered}$

Therefore the amount after 10 years is $45152.78.