What will the dollar amount be if the interest is compounded semiannually for those four years?
A) $3,100
B) $3,188
C) $3,240
D) $3,290

Question

Quizplus · Accepted Answer

Using the formula for compound interest: 
A = P(1 + r/n)^(nt) 
where A = the final amount, P = the principal amount, r = the annual interest rate, n = the number of times the interest is compounded per year, and t = the time in years.

We have: 
P = $2,500 
r = 6% = 0.06 
n = 2 (semiannually) 
t = 4 years

So, 
A = $2,500(1 + 0.06/2)^(2*4) 
A = $2,500(1.03)^8 
A = $3,188.04

Therefore, the correct answer is B.

What Will the Dollar Amount Be If the Interest Is