Question

A demand loan for $8,944.61 with interest at 7.8% compounded semi-annually is repaid after two years, seven months. What is the amount of interest paid?

Select one: a. $1,942.56 b. $1,946.87 c. $1,952.88 d. $1,954.94

Answer 1

Answer:

the correct answer is option D which is $1,954.94

Step-by-step explanation:

loan amount =  $8,944.61

interest =  7.8% = 7.8 %/2 = 3.9 %

compounded semi annually =  2 × 12 + 7 = 31 months

                         time = 31/6 months

$I =P(1+\dfrac{r}{100})^{\frac{31}{6}}-P\\ \\I =  8994.61(1+\dfrac{3.9}{100})^{\frac{31}{6}}-8994.61 \\I =1954.94$

hence, the correct answer is option D which is $1,954.94