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Tracy invests 500 into an ETF which earns 8% per year.In 5years how much will Tracy’s investment be worth if interest is compounded semiannually (twice a year)? Round to the nearest dollar

Sagot :

marcthemathtutor

Answer:

$740

Step-by-step explanation:

(see attached picture for reference)

I'm going to assume that when you wrote "500", you mean "$500"

recall that the formula for compound interest:

A=P(1+r/n) ^ (nt)

where

P = principal amount = $500

r = interest rate = 8% = 0.08

n = number of times compounded in a year = 2 (note: semi-annually means twice a year, hence n = 2)

t = number of years = 5

substituting this into the equation,

A=P(1+r/n) ^ (nt)

A=500 [ 1+(0.08/2) ] ^ (2 x 5)

A= $740.1221

A = $740 (rounded to nearest dollar)

View image marcthemathtutor
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