Problem

A bank features a money market account with an annual percentage rate of $2.3 \%$. Interest is compounded semiannually. Sara makes a one-time deposit of $\$ 5,100.00$ into the account.

How much will Sara's account be worth at the end of 5 years?

What is the Annual Percent Yield (APY) for Sara's account?

Answer

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Answer

Final Answer: The worth of Sara's account at the end of 5 years will be \(\boxed{5717.80}\).

Steps

Step 1 :Let's denote the principal amount (the initial amount of money) as \(P\), which is \$5100.

Step 2 :The annual interest rate \(r\) is 2.3%, or 0.023 when expressed as a decimal.

Step 3 :The number of times that interest is compounded per year \(n\) is 2 (semiannually).

Step 4 :The number of years \(t\) the money is invested for is 5.

Step 5 :We can calculate the amount of money \(A\) in the account after 5 years using the formula for compound interest: \(A = P(1 + \frac{r}{n})^{nt}\).

Step 6 :Substituting the given values into the formula, we get \(A = 5100(1 + \frac{0.023}{2})^{2*5}\).

Step 7 :Calculating the above expression, we find that \(A\) is approximately 5717.80.

Step 8 :Final Answer: The worth of Sara's account at the end of 5 years will be \(\boxed{5717.80}\).

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