Little Miss Buffet takes all the money from her piggy bank and puts it into a savings account at her local bank. The bank promises an annual interest rate of 2.5% on the balance, compounded semiannually. How much will she have after one year if her initial deposit was 200?

Solution

L i ttl e M i ss B u ff e t t ak es a ll t h e m o n ey f ro m h er p i gg y bank an d p u t s i t in t o a s a v in g s a cco u n t a t h er l oc a l bank . T h e bank p ro mi ses an ann u a l in t eres t r a t e o f 2.5% o n t h e ba l an ce, co m p o u n d e d se miann u a ll y . Ho w m u c h w i ll s h e ha v e a f t er o n e ye a r i f h er ini t ia l d e p os i t w a s 200 ?

Amount : 205.03

Solution steps

Translate the problem into an equation:

A = 200 (1 + \frac{0.025}{2})^{2 \cdot 1}

200 (1 + \frac{0.025}{2})^{2 \cdot 1} = 205.03125

Round to the nearest hundredth:

205.03

Amount : 205.03