In: Math
A principal of
$5500
is invested in an account paying an annual rate of
4%.
Find the amount in the account after
6
years if the account is compounded semiannually, quarterly, and monthly.
(a) The amount in the account after
6 years if the account is compounded semiannually is
$
Answer: (a) $6975.33, (b) $6983.54 and (c) $6989.06
Explanation: Principal amount, P=$5500, annual interest rate, r=4%=4/100=0.04, time, t=6 years. Let the accumulative amount after 6 year will be, A=?
The equation governing the accumulative amount, principal amount, interest rate, and time is given by
------------------------------------------- (1)
where, A=accumulative amount, P=Principal amount, r=annual interest rate, t=time (in years) and n denotes the frequency by which an interest in counted in a year.
For, semiannualy, n=2, for quarterly, n=4, for montly, n=12.
(a) For compound interest counted semiannually, n=2. So, from eqn 1
(b) For compound interest counted quarterly, n=4
(c) Compound interest counted montly, n=12