Question

Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop. Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%. Using the tables in the Business Math Handbook that accompanies the course textbook, you can determine that at the end of eight years Anne will receive:_______. A. $16,857. B. $14,484. C. $16,587. D. $14,984.

Answer 1

$14, 984

Step-by-step explanation:

In compound interest, interest earned increases with time. the formula applied in compound interest is

FV = PV × (1+r)n

Where FV is the future vale

PV is the present value of $8,000

r is 8%

n is 8 years

Since interest is compounded twice per year, the number of compounds will be 16( 8 x 2). The applicable interest rate is 0.04%( 8%/12 x 6 months)

FV = $8000 x ( 1 + 0.04)16

FV = $8000 x 1. 872981

Fv = 14, 983.85

Fv = $14, 984