A company invested $50,000 for two years at a rate of 8% compounded semi-annually.The amount of interest they earned over the period is closest to:

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we have:

A = P(1 + r/n)^(nt)

where:

A = final amount
P = principal (initial investment)
r = annual interest rate as a decimal
n = number of times interest is compounded per year
t = time in years

Plugging in the given values, we get:

A = 50000(1 + 0.08/2)^(2*2)
A = 50000(1.04)^4
A = 50000(1.169858)
A = 58492.92

The interest earned is simply the final amount minus the initial investment:

Interest = 58492.92 - 50000
Interest = 8492.92

So the closest answer choice is C.

A Company Invested $50,000 for Two Years at a Rate