The formula to calculate compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (in this case, $1,600.00)
r = the annual interest rate (in decimal form, so 8% is 0.08)
n = the number of times that interest is compounded per year (twice per year means n = 2)
t = the number of years the money is invested for (23 years)
Plugging in these values:
A = $1,600(1 + 0.08/2)^(2*23)
A = $1,600(1 + 0.04)^46
A = $1,600(1.04)^46
A = $1,600 * 7.527470
A = $12,036.35
Therefore, after 23 years, the balance in the account will be $12,036.35.
A $1,600.00 principal earns 8% interest, compounded semiannually twice per year. After 23 years,
what is the balance in the account?
1 answer