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3 August, 08:52

What if Jennifer were to invest $2.750 today, compounded semiannually, with an annual interest rate of 5.25%. What amount of interest will Jennifer earn in one year? a. $2,896.27 b. $84.27 c. $525.27 d. $146.27

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  1. 3 August, 09:10
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    d. $146.27

    Explanation:

    For computing the interest earned, first we have to calculate the future value which is shown below:

    Future value = Present value * (1 + rate) ^number of years

    where,

    Present value = $2,750

    Rate = 5.25% : 2 = 2.625%

    Number of years = 1 year * 2 = 2 years

    So, the future value

    = $2,750 * (1 + 2.625%) ^2

    = $2,750 * 1.0531890625

    = $2,896.27

    Now the interest earned would be

    = $2,896.27 - $2,750

    = $146.27
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