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Daniella, owner of a local subway shop, loaned $50,000 to pete hall to help him open a subway franchise. Pete plans to repay daniella at the end of 8 years with 6% interest compounded semiannually. How much will daniella receive at the end of 8 years?.

Answer :

Adioabiolago

The total amount of money Daniella will receive after 8 years at interest rate compounded semiannually is $5,030,105

How to find compound interest

  • Principal = $50,000
  • Rate = 6%

= 0.06

  • Time = 8 years
  • Number of periods = 2 (semi annually)

A = P(1 + r/n)nt

where,

  • A = compound interest
  • P = principal
  • r = interest rate
  • n = number of periods
  • t = time (years)

Solve the equation for A

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

A = 50,000.00(1 + 0.06/2)^(2×78)

A = 50,000.00(1 + 0.03)^156

A = $5,030,105.09

Approximately, $5,030,105

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