Precalculus (10th Edition)

Published by Pearson
ISBN 10: 0-32197-907-9
ISBN 13: 978-0-32197-907-0

Chapter 5 - Exponential and Logarithmic Functions - 5.7 Financial Models - 5.7 Assess Your Understanding - Page 321: 44



Work Step by Step

According to the Compound Interest Formula, where $P$ is the principal, the amount deposited, $r$ is the annual interest rate, $n$ is the number of times the interest is compounded annually, $t$ is the number of years, $A$ is the amount you get back after $t$ years: $A=P\cdot(1+r)^{n\cdot t}.$ Here $t=0.5$ years $P=\$200$ $n=12$ (since it is compounded monthly) $r=1.25\%=0.0125$ Substitute these values into the formula above to obtain: $A=\$200\cdot(1+0.0125)^{12\cdot 0.5}\approx\$215.48.$
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