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25 March, 11:18

Lee Holmes deposited $15,000 in a new savings account at 9% interest compounded semiannually. At the beginning of year 4, Lee deposits an additional $40,000 at 9% interest compounded semiannually. What is the balance in Lee's account?

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  1. 25 March, 14:28
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    The balance in Lee's account is $72,680.5

    Explanation:

    The formula to calculate amount for a compound interest is given as,

    A = P (1+r) ^n

    Since the interest is compounded semiannually, at the end of year 3, the amount in Lee's account would be = 15000 (1+0.09) ^6 = 15000 (1.09) ^6 = $25,156.50

    At the beginning of year 4, she deposits an additional $40,000

    At the end of year 4, the amount in Lee's account would be = 40,000 (1+0.09) ^2 = 40,000 (1.09) ^2 = $47,524

    Lee's balance = $25,156.50 + $47,524 = $72,680.5
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