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Fabian has a savings account balance of $1,374.73. The interest rate on the account is %3.9 compounded twice a year. If he opened the account nine years ago, what was the value of his deposit?

Respuesta :

Yna9141
The effective interest given that the account is compounded semi-annually is calculated through the equation,

     ieff = (1 + i/n)^m - 1

Substituting the known values,
    ieff = (1 + 0.039/2)^2 - 1
    ieff = 0.0394

The value of the initial investment can be calculated through the equation,
     F = P x (1 + ieff)^n

     P = F / (1 + ieff)^n

Substituting the known values,
    P = ($1374.73) / (1 + 0.0394)^9

    P = $971.06

ANSWER: $971.06

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