Bonds pay interest semiannually and interest is not compounded.
"Traditional" accounts, like bank savings accounts, pay interest monthly (usually) and add it to the principal.
1. The "traditional account", will have
5000 - X invested in it, initially, if the bond account gets X.
2. The "bond account" would have 500 + 4% or $520 after one year, if X = 500. The Traditional Account, compounded monthly, would have
$4500*(1 + 0.05/12)^12 = $4730.23
Kent invested $5,000 in a retirement plan.He allocated X dollars of the money to a bond account that earns 4% interest per year and the rest to a traditional account that earn 5% interest per year.
1.Write an expression that represents the amount of money invested in the traditional account.
2.If Kent put $500 in the bond account, how much money does he have in his retirement plan after one year?
Could someone help me on how to solve these two? Thanks
2 answers
U gotta look at the answer key. DUH!