Question

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?

Answer #1

**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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