Question

A savings bond offers intrest at rate of 6.6% compunded semi-annually, and a 500$ bond is purchased.

Write an equation for the value of the investment as a function of time, in years.

Answer 1

the general form is
A = P (1 + r/n)^nt, where t is years, n is number of compounds per year.

Answer 2

So plug in r = 0.066, n=2, and P=500; that's your formula.

Answer 3

but wouldn't I use a=p(1+i)^2t?

Answer 4

It's the same equation as long as you select i correctly.

Answer 5

Remember, you're getting the equivalent of 6.6% annually, not 6.6% every compounding period.

Answer 6

So you divide the annual interest rate by 2, and compound twice as often (which is why the exponent is 2t instead of t)

Answer 7

It's semi-annually so does that means i do 0.066/2 =i?

Answer 8

Right.

Answer 9

P (1 + r/n)^nt turns into that for n = 2.

Answer 10

:) Thank you, it's the first time I'm using this site. Really helpful. Appreciate your help.

Answer 11

no problem.

Answer 12

Please click 'good answer' to give medals out to people who help you. :-)

Answer 13

:) Okie dokie.

Answer 14

a=p(1+i)^2t
a=500(1.033)^2t
Is that right?

Answer 15

yep i think so