Math word problem

Question

Suppose that $2000 is invested at a rate of 4%, compounded semiannually. Assuming that no withdrawals are made, find the total amount after 5 years. Do not round any intermediate computations, and round your answer to the nearest cent

Answer 1

Hello Shadala,

You should use the compound interest formula for this.

This is the compound interest formula.

r is the interest rate, n is the number of times interest is applied per time period, t is the number of total time periods elapsed. Semi annual means twice a year, so there are 5 compounding periods and the interest is applied twice in every compounding period. P is the initial principal ($2000).

($2000)*(1+(0.04/2))^(2*10)=$2971.89