Kate is thinking about investing $60 000 for 4 years. She deposits her money into an account which earns interest paid semiannually at a rate of 7% p.a. After 2½ years, the interest rate drops to 5.6% p.a. and stays constant for the remainder of the investment period.

Question

Use Excel or another suitable method to solve the problems below.
(a) How much interest was accrued in the second year of the investment?

(b) What will be the balance of Kate’s account at the end of the fourth year?

Answer 1

amount after the first 2½ years
= 60000(1.035)^7
= 76336.756

I will assume that the rate for the remaining 1½ of 5.6% is also compounded semiannually

amount at end of 4 years
= 76336.756(1.028)^3
= 82930.26

Answer 2

Don't know how I got 7 as the exponent in the first part
of course it should have been 5 ( for 5 half years in 2 1/2 years)

Please make the necessary corrections.

Answer 3

A woman has a total of $9,000 to invest. She invests part of the money in an account that pays 8% per year and the rest in an account that pays 11% per year. If the interest earned in the first year is $840, how much did she invest in each account?