A mortgage balance of $17,321.50 is renewed for a 3-year period at 8% compounded semiannually. Determine the amount of interest paid in the 3^rd year.

Question

Quizplus · Accepted Answer

The correct answer is A because the interest paid in the 3rd year is $268.85. This can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, P = $17,321.50, r = 8%, n = 2, and t = 3. Plugging these values into the formula, we get A = $17,321.50(1 + 0.08/2)^(2*3) = $19,890.35. The interest paid in the 3rd year is therefore A - P = $19,890.35 - $17,321.50 = $268.85.

A Mortgage Balance of $17,321