College Algebra (6th Edition)

Published by Pearson
ISBN 10: 0-32178-228-3
ISBN 13: 978-0-32178-228-1

Chapter 4 - Summary, Review, and Test - Review Exercises: 10

Answer

5.5$\%$ compounded semiannually

Work Step by Step

After $t$ years, the balance, $A$, in an account with principal $P$ and annual interest rate $r$ (in decimal form) for $n$ compoundings per year: $\displaystyle \quad A=P(1+\frac{r}{n})^{nt}$ -------------- For $5.5\%,$ compounded semiannually (n=2): $A=5000(1+\displaystyle \frac{0.055}{2})^{2\cdot5}\approx 6558.26$ 5.25$\%$ compounded monthly (n=12): $A=5000(1+\displaystyle \frac{0.0525}{12})^{12\cdot 5}\approx 6497.16$ Return is greater for for 5.5$\%$ compounded semiannually
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