Multiple choice

David invested \$8,000 for one year in an account that compounds interest semi-annually. He wants to earn at least \$1,245 in interest. What is the minimum annual interest rate, compounded semi-annually, that would achieve his goal?

  1. 15%

  2. 18%

  3. 18.5%

  4. 19%

  5. 19.5%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest = P * (1 + r/200)^2 - P. 1245 = 8000 * (1 + r/200)^2 - 8000. 9245 = 8000 * (1 + r/200)^2. 1.155625 = (1 + r/200)^2. sqrt(1.155625) = 1.075. 1 + r/200 = 1.075. r/200 = 0.075. r = 15%.

Keep practicing — related questions