Jason s savings account has a balance of $1847. after 5 years, what will the amount of interest be at 6% compounded semiannually?

a. $294.18

c. $554.10

b. $635.21

d. $624.70

the answer is B.) 635.21

A money that is compounded semiannually by 6% has an effective interest of,

ieff = (1 + i/n) ^n - 1

where i is the rate given and n is the number of compounding per year. Substituting the given,

ieff = (1 + 0.06/2) ^2 - 1 = 0.0609

After 5 years, the amount of money should be,

A (5) = ($1847) (1 + 0.0609) ^5 = 2482.21

The amount of interest is,

$2482.21 - $1847 = $635.21

Thus, the answer is letter C.