For the following exercise use the compound interest formula

For the following exercise, use the compound interest formula, A(t) = P 1 + r n nt , where money is measured in dollars. An account is opened with an initial deposit of $6,500 and earns 3.6% interest compounded semi-annually. What will the account be worth in 40 years? (Round your answer to the nearest cent.)

Solution

A(t) = P(1 + r /n )^nt

Given: P1 = $ 6500 ; r = 3.6% ; n = 2 (compounded semi-annually) ; t = 40 yrs

Plug the vlues in formula:

A(t) = 6500( 1+ .036/2)^2*40

= 6500 ( 1.018)^80

= $ 27085.42