Jane invested $2500 into an RRSP that earned interest at 6% compounded semi annually for ten years a) find the balance of account at end of peroid b)how much interest is earned c) what is effective rate of interest

The answers to the question are

a) The balance of account at end of period $4515.278

b) The interest earned $2515.278

c) The effective rate of interest is 0.0609 or 6.09 %

Step-by-step explanation:

To solve the question

a) Here we have the compound interest formula given by

Where,

P = Initial investment =  $2500

r = Annual interest rate = 6% =0.06

n = Number of compounding periods per year = 2

t = Number of years 10

From which we have

= $4515.278

The balance of account at end of period $4515.278

b) Interest earned = Balance -  initial investment = $4515.278 - $2500 = $2515.278

c)

The effective interest rate is the interest rate that accrues to an investment or loan as a result of the compounding the interest for a given time period of time. It is also known as the effective annual interest rate

The effective rate of interest is given by

Effective rate = Where

r = Annual interest rate

n = Number of annual compounding periods

this gives =  0.0609 = 6.09 %

a

step-by-step explanation: