Question

# You have deposited \$1,000 with an interest rate of 3% every 6 months where the interest...

You have deposited \$1,000 with an interest rate of 3% every 6 months where the interest is computed every 6 months How much you will have after 5 years?

Two years later after the initial deposit of the money, you deposited additional \$1,000 with an interest rate of 2% every 6 months (applies only to this deposit). How much will you have after 5 years?

Ans: in first case: Principal (P) = \$1000 rate of interest (r) = 3% every 6 months

Total no of periods (n) = 5 * 2 = 10 periods

Amount at the end of 5 years = P(1+r)n

= 1000(1+0.03)10

= \$1343.91

After two years we deposited \$1000 which means \$1000 is invested for 3 years. So principal = \$1000

rate of interest = 2% Total no of periods = 2*3 = 6 periods

Amount at the end of 3 years = P(1+r)n

= 1000 (1+0.02)6

= \$1126.16

Thus total amount at the end of 5 years isthe sumof \$1000 invested for 5 years and additional \$1000 invested for 3 years which is equal to \$1343.91 + \$1126.16 = \$2470.07

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