Lee Holmes deposited $15,800 in a new savings account at 9% interest compounded

Question

Lee Holmes deposited $15,800 in a new savings account at 9% interest compounded semiannually. At the beginning of year 4, Lee deposits an additional $40,800 at 9% interest compounded semiannually.

At the end of 6 years, what is the balance in Lee’s account? (Do not round intermediate calculations. Round your answer to the nearest cent.)

Lee Holmes deposited $15,800 in a new savings account at 9% interest compounded semiannually. At the beginning of year 4, Lee deposits an additional $40,800 at 9% interest compounded semiannually.

Explanation / Answer

Calculation showing FV of $15800

FV = PV(1+r)^n

r = 9%/12 = 0.75% , n = 6*2 = 12

FV = 15800(1+0.75%)^12

=15800(1.0075)^12

=15800*1.093807

=17282.15$

Now Calculation showing FV of $40800

FV = 40800(1.0075)^4

=40800(1.030339)

=42037.87$

Total account value = 42037.87+17282.15

= 59319.99$

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