Multiple choice

Find the interest on $2,400 at an annual rate of 8% in one year if the interest is compounded every 4 months.

  1. $141
  2. $150
  3. $197
  4. $234
  5. $312
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Principal = 2400, Rate = 8% per annum, compounded every 4 months (3 times a year). Rate per period = 8%/3 = 8/3%. Amount = 2400 * (1 + 8/300)^3 = 2400 * (1.0266)^3 = 2400 * 1.0821 = 2597. Interest = 2597 - 2400 = 197.

AI explanation

Using the formula for compound interest payable periodically, the new rate is 8% / 3 = 2.66% and the number of periods is 3. The amount becomes 2400 * (1 + 0.0266)^3 = 2596.88. The compound interest earned is 2596.88 - 2400 = 196.88, which rounds to $197.

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