Bob deposited $25k in a savings account @ 10% interest compounded semiannually. At the beginning of year 4 he deposited another $40k @10% compounded semiannually. At the end of 6yrs, what is the balance in his account? I have worked it out several ways, but now I am unsure of which way to go....(Worried)
25000x1.7716 (per table in my book)=44290-25000=$19290 interest for 4yrs off $25000
40000x1.4641=58564-40000=18564 interest for 2 yrs off $40000
I also worked it out this way.......
4yrsx2=8 periods; 5%
25000x2.1436(book table)=53590-25000=$28590 interest for 4 yrs off $25000
40000x1.4641=5864-40000=18564 interest for 2yrs off $40000
Jul 22nd 2012, 04:25 PM
really? ... does $19290 interest on a 3 year investment of $25000 at 10% make sense?
if so, let me know where that institution is ... I'll deposit all I have ASAP.
general equation for compounded interest is
where A = account balance after t years paid at an APR of r, compounded n times a year.
after 3 years ...
add 40000 at the end of year 3 ...
at the end of 6 years
Jul 22nd 2012, 04:45 PM
You could also do this by calculating the balance on the first amount for the full 6 years:
the the balance on the second amount for three years: and then adding: $98500.23.
The powers of "12" and "6" are, of course, the 12 "half years" in 6 years and 6 "half years" in 3 years. And, of course, the "1.05" is the 10% per year divided by 2 since we are dealing with half years, together with the "1" for the original amount.
Jul 23rd 2012, 10:42 AM
Originally Posted by businessmgmt
At the beginning of year 4 he deposited another $40k @10% compounded semiannually.
That was probably confusing you.
It is the SAME as "At the end of year 3".