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Expert: Chanda Walker - 3/14/2009


Question
a sum of money is invested at a half yearly compound interest rate of 5%. if the difference of principal at the end of 6 months and 12 months is $ 126 find the sum of money invested and also find the amount at the end of  1 1/2 (one and a half) years

Answer
FV = P(1 + r/n)^t*n

P unknown
r = 0.05
n = 1
t = 1

(Since the interest rate is given in half yearly compound interest rate, the time unit of t = 1 is 6mo.)

FV(t = 1) = P(1.05)^1
FV(t = 2) = P(1.05)^2

FV(t = 2) - FV(t = 1) = 126 = P(1.05)*(1.05 - 1)
126 = P*(1.05)*(.05)
P = 126*20/1.05
P = $2400

FV(t = 3) = 2400(1.05)^3
FV(t = 3) = $2778.30  (at 1.5 years)

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Chanda Walker

Expertise

I can answer word problems involving mathematics at the high school and college level. I particularly enjoy calculus word problems. Please don't just type the math problem without comments. If you don't tell me what problem your having, I can't help.

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Have done word problems as a tutor and as a student of mathematics and physics for years.

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Sigma Xi

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Optical Science PhD

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I've answered hundreds of questions here at AllExperts.com in algebra, physics and general math sections.

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