Question

Tina, the owner of a home and garden store, lends $8,000 to Lana to help her open an art shop. Lana plans to repay Tina at the end of eight years with interest compounded semiannually at 8%. Using the tables found in the textbook, you can determine that at the end of eight years, Tina will receive A. $14,484. B. $14,984. C. $16,587. D. $16,857.

Answer 1

B. $14,984

Explanation:

The multiplier is ...

(1 +r/n)^(nt) . . . . where r is the nominal annual rate, n is the number of times interest is compounded per year, and t is the number of years.

Here, that multiplier is ...

(1 +.08/2)^(2·8) = 1.04^16 ≈ 1.87298

Then Lana will be paying Tina ...

$8000×1.87298 ≈ $14984

at the end of 8 years.