Brenda invests $4,848 in a savings account with a fixed annual interest rate of 5% compounded 2 times per year. What will the account balance be after 6 years?

Accepted Solution

She invests some amount in a saving account of fixed interest compounded half-yearly. It says to find its Future Value after six years. The principal amount is P = $4,848. Annual interest rate is 5% i.e. r = 0.05 Compounding period is two times per year i.e. n = 2. Time of investment is t = 6 years. We know the formula of Future Value is given by :- [tex] FV=P*(1+\frac{r}{n})^{nt} [/tex] We can plug the given values in the formula to calculate the answer.[tex] FV = 4848*(1+\frac{0.05}{2})^{(2*6)} \\\\
FV = 4848*(1+0.025)^{(12)} \\\\
FV = 4848*(1.025)^{(12)} \\\\
FV = 4848*(1.344888) \\\\
FV = 6520.02102 [/tex]Hence, future value of investment after six years is 6,520.02 dollars.