Question

Shen borrowed $8000 at a rate of 12%, compounded semiannually. Assuming he makes no payments, how much will he owe after 7 years?

Answer 1

Answer:

$18,087.23

Step-by-step explanation:

The future worth of the loan in 7 years compounded semiannually is computed as shown below using the future value formula adjusted for semiannual compounding:

FV=PV*(1+r/2)^n*2

FV is the worth of the loan in 7 years which is unknown

PV is the actual amount of loan which is $8,000

r is the rate of interest of 12%

n is the number of years of the loan which is 7 years

the 2 is to show that interest is computed twice a year

FV=8000*(1+12%/2)^7*2

FV=8000*(1+6%)^14

FV=8000*1.06^14=$18,087.23