Elementary Technical Mathematics

Published by Brooks Cole
ISBN 10: 1285199197
ISBN 13: 978-1-28519-919-1

Chapter 1 - Section 1.16 - Application Involving Percent: Business and Personal Finance - Exercises: 5

Answer

Mary Lou will have $\$23,152.64$ in her savings account when she is ready to enroll in college.

Work Step by Step

Find the total value (A) using the formula $A=P\left(1+\dfrac{r}{n}\right)^{nt}$ where $P$=principal amount, $r=$annual interest rate, $t$=time in years, and $n$=number of compounding periods in a year The given problem has: $P=\$15,000$ $t=8$ $r=5.5\%$ $n=2$ (since compounded semi-annually) Use the formula above to obtain: $A=\$15,000\left(1+\dfrac{5.5\%}{2}\right)^{2(8)} \\A=\$15,000\left(1+\dfrac{0.055}{2}\right)^{16} \\A=\$23,152.64154 \\A\approx \$23,152.64$
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