A savings account earns an interest rate of 3.75% compounded semi-annually for an account with an initial deposit of 895. How much money will be in the account after 10 years? Round your answer to the nearest hundredth.

Solution

A s a v in g s a cco u n t e a r n s an in t eres t r a t e o f 3.75% co m p o u n d e d se mi - ann u a ll y f or an a cco u n t w i t h an ini t ia l d e p os i t o f 895. Ho w m u c h m o n ey w i ll b e in t h e a cco u n t a f t er 10 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 h u n d re d t h .

Amount : 1297.7

Solution steps

Translate the problem into an equation:

A = 895 (1 + \frac{0.0375}{2})^{2 \cdot 10}

895 (1 + \frac{0.0375}{2})^{2 \cdot 10} = 1297.70348 \dots

Round to the nearest hundredth:

1297.7

Amount : 1297.7