Base on my calculations, the answer is not in the choices given. First, we have to acknowledge that the interest rate given is not the effective interest rate instead it is called the nominal interest rate therefore we have to convert it first to an effective interest rate. We use the following formula: Effective Interest rate = [[1 + (r/m)]^m] - 1 where r is the nominal interest rate and m is the number of compounding times For this case, m is equal to 2 since it is compounded semianually. Effective Interest rate = [[1 + (.12/2)]^2] - 1 = .1236 We then use the calculated effective interest rate to the formula for the Compound Interest Rate Formula. Future Value = Present Value (1 + Effective interest rate)^(no. of years)Future Value = 3000 (1 + .1236)^( 3) = 4255.56 dollars
