Manually calculate the compound interest on an investment of $7,500 at 6% interest, compounded semiannually, for 1 year.
A) $456.75
B) $7,956.75
C) $7,950.00
D) $450.00

Question

Quizplus · Accepted Answer

The compound interest can be calculated using the formula A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($7,500), r is the annual interest rate (6% or 0.06), n is the number of times that interest is compounded per year (2 for semiannually), and t is the time the money is invested for in years (1 year). Plugging in the values: A = 7500(1 + 0.06/2)^(2*1) = 7500(1 + 0.03)^(2) = 7500 * 1.0609 = $7956.75. The interest earned is $7956.75 - $7500 = $456.75.

Manually Calculate the Compound Interest on an Investment of $7,500