In order to pay for college, the parents of a child invest 10,000 in a bond that pays 8% interest compounded semiannually. How much money will there be in 21 years? Round your answer to the nearest cent.

Solution

I n or d er t o p a y f or co ll e g e, t h e p a re n t s o f a c hi l d in v es t 10, 000 in a b o n d t ha t p a ys 8% in t eres t co m p o u n d e d se miann u a ll y . Ho w m u c h m o n ey w i ll t h ere b e in 21 ye a rs ? R o u n d yo u r an s w er t o t h e n e a res t ce n t .

Amount : 51927.84

Solution steps

Translate the problem into an equation:

A = 10000 (1 + \frac{0.08}{2})^{2 \cdot 21}

10000 (1 + \frac{0.08}{2})^{2 \cdot 21} = 51927.83911 \dots

Round to the nearest hundredth:

51927.84

Amount : 51927.84