Answer
(a) After five years, there will be \$4875.98 in the account.
(b) The interest earned is \$875.98
Work Step by Step
(a) We can use this formula:
$A = P~(1+\frac{r}{n})^{nt}$
$A$ is the final amount in the account
$P$ is the principal (the amount of money invested)
$r$ is the interest rate
$n$ is the number of times per year the interest is compounded
$t$ is the number of years
$A = P~(1+\frac{r}{n})^{nt}$
$A = (\$4,000)~(1+\frac{0.04}{2})^{(2)(5)}$
$A = \$4875.98$
After five years, there will be \$4875.98 in the account.
(b) We can find the interest earned.
$A - P = \$4875.98 - \$4000 = \$875.98$
The interest earned is \$875.98
