In order to pay for college, the parents of a child invest 10,000 in a bond that pays 6% interest compounded semiannually. How much money will there be in 17 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 6% 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 17 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 : 27319.05

Solution steps

Translate the problem into an equation:

A = 10000 (1 + \frac{0.06}{2})^{2 \cdot 17}

10000 (1 + \frac{0.06}{2})^{2 \cdot 17} = 27319.05295 \dots

Round to the nearest hundredth:

27319.05

Amount : 27319.05