Question

Carla invested $1000 in savings bonds. If the bonds in 6.75% interest compounded semi-annually, how much total will Karla earn in 15 years?

Answer 1

Answer:

Karla will earn $2,706.86 in 15 years.

Step-by-step explanation:

The compound interest formula is given by:

$A = P(1 + \frac{r}{n})^{nt}$

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this exercise, we have that:

Carla invested $1000 in savings bonds. This means that $P = 1000$

Semiannually is twice an year, so $n = 2$

6.75% interest, so $r = 0.0675$.

How much total will Karla earn in 15 years?

This is A when t = 15.

So

$A = P(1 + \frac{r}{n})^{nt}$

$A = 1000(1 + \frac{0.0675}{2})^{2*15}$

$A = 2,706.86$

Karla will earn $2,706.86 in 15 years.