Ms. Lopez deposits $ 100 in an account that pays 20% interest, compounded semiannually.
Ms. Lopez deposits $ 100 in an account that pays 20% interest, compounded semiannually. How much money will there be in the account at the end of one year?
Answer/Solution
$121.00
Steps/Work
et me explain the concept for those who are not familiar with compounded semi annually/ quarterly etc..
it basically means, here, that the interest will be paid twice, after 6 months and at the end of year..so twice..
but interest is 20%, which will get distributed semiannually that is 10%...
so the Q literally means ..
after 6 months..
100*10/100 + 100=110..
at the end of year
110*10/100 + 110= 121..
or we put it in compound interest formula..
where CI=10%, T is 2 and P=100..
so amount = 100(1 + 10/100)^2=100*1.1*1.1=121..
ANSWER:C
it basically means, here, that the interest will be paid twice, after 6 months and at the end of year..so twice..
but interest is 20%, which will get distributed semiannually that is 10%...
so the Q literally means ..
after 6 months..
100*10/100 + 100=110..
at the end of year
110*10/100 + 110= 121..
or we put it in compound interest formula..
where CI=10%, T is 2 and P=100..
so amount = 100(1 + 10/100)^2=100*1.1*1.1=121..
ANSWER:C