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23 December, 14:12

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?

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  1. 23 December, 14:48
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    Interest earned = $146.27

    Explanation:

    Giving the following information:

    Initial investment = $2,750

    Interest rate = 5.25% compounded semianually.

    First, we need to calculate the final value for the first year.

    FV = PV * (1+i) ^n

    n=2

    i = 0.0525/2 = 0.02625

    PV = 2,750

    FV = 2,750 * (1.02625) ^2

    FV = $2,896.27

    Interest earned = 2,896.27 - 2,750 = $146.27
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