Suppose that $2000 is loaned at a rate of 11.5%, compounded semiannually. assuming that no payments are made, find the amount owed after 5 years. do not round any intermediate computations, and round your answer to the nearest cent.

Question

Business

Yair Key

27 January, 11:02

Suppose that $2000 is loaned at a rate of 11.5%, compounded semiannually. assuming that no payments are made, find the amount owed after 5 years. do not round any intermediate computations, and round your answer to the nearest cent.

+2

Answers (1)

Know the Answer?

Chana Reed · Answer 1

This problem is solved by using the compound interest formula:

A=P (1 + (I/period)) ^ (number of periods)

Where A = amount accumulated and P = amount loaned and I = Interest

A = ? P = $2, 000, I = 0.115, Period = 2 (semi annually) Number of period = 2

*7 (I. e paid twice over a 7 yrs span)

So we have

A = 2000 (1 + 0.115/2) ^ (14)

A = 2000 (1 + 0.0575) ^ (14)

A = 2000 (1.0575) ^ (14)

A = 2000 (2.1873851765154) = 4374.77035

So we have 4374.80 to the nearest cent.