Answer to Question #265913 in Financial Math for Kwabenya

Question

A depositor planned to leave $2,000 in a

savings account paying 5% converted

semiannually for 5 years. However, at the end of

21/2 years the depositor had to withdraw

$1,000. What amount will be in the account at

the end of the original 5 year period?

Answer 1

At the end of 2.5 years, the amount in the savings account was;

$A = P(1 + i)^n$

$A = 2000(1 + 0.05)^{(2.5\times2)}$

$A =2552.56$

After withdrawing 1000,the amount remaining will be 1552.56 which will act as the principal.

Amount in the account at the end of the original 5 year period will then be;

$A = P(1 + i)^n$

$A = 1552.56(1 + 0.05)^{(2.5\times2)}$

$A =\$1981.5$