Karen Gaines invested 12,000 in a money market account with an interest rate of 2.25% compounded semiannually. Seven years later, Karen withdrew the full amount to put toward the down payment on a new house. How much did Karen withdraw from the account?

Solution

K a re n G ain es in v es t e d ​12, 000 in a m o n ey ma r k e t a cco u n t w i t h an in t eres t r a t e o f 2.25​% co m p o u n d e d se miann u a ll y . S e v e n ye a rs ​ l a t er, K a re n w i t h d re w t h e f u ll am o u n t t o p u t t o w a r d t h e d o w n p a y m e n t o n a n e w h o u se . Ho w m u c h d i d K a re n w i t h d r a w f ro m t h e ​ a cco u n t ?

Amount : 14034.62

Solution steps

Translate the problem into an equation:

A = 12000 (1 + \frac{0.0225}{2})^{2 \cdot 7}

12000 (1 + \frac{0.0225}{2})^{2 \cdot 7} = 14034.62234 \dots

Round to the nearest hundredth:

14034.62

Amount : 14034.62