What would be the future value of a loan CD of $1,000 for two years if the bank offered a 10% interest rate compounded semiannually?
A)$1,720
B)$1,960
C)$1,200
D)$1,216

Question

Quizplus · Accepted Answer

The future value of the loan can be calculated using the formula for compound interest: FV = P(1 + r/n)^(nt). Here, P = $1,000, r = 0.10, n = 2 (since it's compounded semiannually), and t = 2 years. Plugging in these values, FV = 1000(1 + 0.10/2)^(2*2) = 1000(1.05)^4 = $1,216.

What Would Be the Future Value of a Loan CD