Merlin is saving money to purchase a new car. If he deposits $5,000 into a saving account that pays 8% interest, compounded semi-annually, how much will he have in his account at the end of the first year?
A)$5,400.00
B)$5,200.00
C)$5,408.00
D)$5,008.00

Question

Quizplus · Accepted Answer

To calculate the amount of interest Merlin will earn in one year, we need to use the formula:

A = P(1 + r/n)^(nt)

Where:

A = the total amount, including interest
P = the principal amount (the initial deposit)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years

Plugging in the given values, we get:

A = 5000(1 + 0.08/2)^(2*1)
A = 5000(1 + 0.04)^2
A = 5000(1.04)^2
A = 5408

Therefore, Merlin will have $5,408.00 in his account at the end of the first year.

Merlin Is Saving Money to Purchase a New Car