Future Value "FV" of that deposit: 15,600(1 + 0.11/2)^(2semi-annual periods per year * 6yrs)
= 15,600(1.055^12)
= 29,658.84
The FV of the 40,600, which earns interest for 2 years, e.g. for 4 semi-annual periods, is:
40,600(1.055^4) = 50,296.28
Add the two together: $79,955.11
There's probably a formula for that, but it's been 40 years since high school, so I'll work it out the long way. If the interest is compounded semi-annually, I would do 6 months at a time. So, in each 6 month period, he makes 5.5%.
15,600 x 1.055 = $16,458
Now the second 6 months: 16,456 x 1.055 = 17,363.19.
Do that for 3 years. Then add in the 40,600 and do it for another 3 years, and you'll get the total after 6 years.
Now, what I want to know is -- where did Lee Holmes find a savings account that pays 11%??
Please help, I' m lost. An example would be nice.
Lee Holmes deposited $15,600 in a new savings account at 11% interest compounded semiannually. At the beginning of year 4, Lee deposits an additional $40,600 at 11% interest compounded semiannually.
At the end of 6 years, what is the balance in Lee’s account?
