Question

The annual interest rate on a loan is 12% which can be represented using the expression 1.12t. Write an expression that represents the 6 month interest rate. A) 1.058t B) 1.0582t C) 1.119t D) 1.1192t

Answer 1

B) 1.0583^t

Explanation:

The formula for the interest earned on an investment is

I = (1 + r)^t

Data:

I = 1.12

t = 2

Calculations:

1.12 = (1 + r)²

Take the square root of each side

1.058 30 = 1 + r

Then, the formula for the interest calculated on a six-month basis is

I = 1.0583^t

The option with the closest answer is B) 1.0582^t.