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%. At the end of eight years, Anne will receive

A. $14,984
B. $16,857
C. $16,587
D. $14,484
E None of these

In this question, we are asked to calculate the compound interest calculated on an amount if the interest on the said amount is computed semiannually, meaning 2 times a year.

To calculate this, we make use of a mathematical formula;

Mathematically;

C •I = P(1 + r/n)^nt

where P is the principal amount = $8,000

r is the interest rate = 8% = 0.08

t = 8 years

n = number of times of compounding per year = 2

now let’s insert these values, we have;

= 8,000( 1 + 0.08/2)^(2*8)

8,000 ( 1.04)^16

= $14983.85