SOLUTION: Lisa opens a savings account with $1,950. The bank pays 5% compounded semiannually. After one-and-a half years Lisa deposits an additional $875. What is the balance in her account

Question 1148048: Lisa opens a savings account with $1,950. The bank pays 5% compounded semiannually. After one-and-a half years Lisa deposits an additional $875. What is the balance in her account at the end of a total of 2 years?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
she deposits $1950 in the account.
the interest rate is 5% compounded semi-annually.
5% / 2 = 2.5% every half year.
time periods are in half years.
in 1.5 years (3 half years), she deposits an additional $875.
what is the balance in her account at the end of 2 years.

future value of $1950 for 2 years (4 semi-annual periods) is equal to $1950 * (1 + .025) ^ 4 = $2152.435137.

future value of $875 for 1 semi-annual period is equal to $875 * (1.025) = $896.875.

the sum of the two future values is $3049.310137.

that's how much she will have in her account at the end of two years.

here is the cash flow analysis from excel.

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