Monday, July 27, 2009

What is the effective rate of $18,600 invested for one year at 7.5% compounded semiannually?

Round to the nearest hundreth?





A 7.64%


B.7.09%


C.3.82%


D 3.75%

What is the effective rate of $18,600 invested for one year at 7.5% compounded semiannually?
The answer is (A).


Paying interest on top of interest is what helps your money grow at a faster rate.





You have to understand what the word compounded means to solve this problem.
Reply:D because 7.5/2 is 3.75 and semiannually is twice a year.


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