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

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

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+(r)/(100))^{(31)/(6)}-P\\ \\I =  8994.61(1+(3.9)/(100))^{(31)/(6)}-8994.61 \\I =1954.94`

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