Kelly plans to put her graduation money into an account and leave it there for 4 years while she goes to college. She receives 15,000 in graduation money that she puts it into an account that earns 5% interest compounded semi-annually. How much will be Kelly’s account at the end of 4 years/ Find the Future Value.
just plug your numbers into the formula.
15000(1 + .05/2)^(2*4) = _____
To find the future value of Kelly's account at the end of 4 years, we can use the formula for compound interest:
Future Value = Principal * (1 + (interest rate / number of compounding periods))^(number of compounding periods * number of years)
In this case, the principal (initial amount) is $15,000, the interest rate is 5%, and the account compounds semi-annually (twice a year). So, the interest rate per compounding period would be 5% / 2 = 2.5%. The number of compounding periods per year is 2 (since it compounds semi-annually), and the number of years is 4.
Plugging in these values into the formula, we can calculate the future value:
Future Value = $15,000 * (1 + (2.5% / 100))^((2 * 4))
First, let's calculate (2.5% / 100):
(2.5% / 100) = 0.025
Next, let's calculate (1 + 0.025):
(1 + 0.025) = 1.025
Now, let's calculate (2 * 4):
(2 * 4) = 8
Finally, let's calculate the Future Value:
Future Value = $15,000 * (1.025)^8
Now we just need to calculate (1.025)^8:
(1.025)^8 ≈ 1.2184
Now, let's multiply $15,000 by 1.2184:
Future Value ≈ $15,000 * 1.2184
Future Value ≈ $18,276
Therefore, Kelly's account will have approximately $18,276 at the end of 4 years.