Question

What is the future value (total amount due) on a $12,000 loan at 8% compounded

semiannually (twice a year) for 7 years?

Answer 1

Answer: $20,780.10

Explanation:

You need the Compound Interest Formula

A = P(1 + r/n)^nt

Step 1: Create the equation.

12,000(1 + 0.08/2)¹⁴

Step 2: Solve the equation.

Follow PEMDAS (parenthesis, exponents, multiplication...)

Parenthesis: (1 + 0.08/2) = (1 + 0.04) = (1.04)

Exponents: (1.04)¹⁴ = (1.73168)

Multiplication: 12,000(1.73168) = 20,780.1