Principal = 2000 $
Annual interest rate = 6%
Semiannually means twice a year
Number of compounding periods = 2
So 6% is split into two
3 % halfway through the year
3% at the end of the year
Interest for first half of year= 2000 * (3/100) = 60 $
Interest for second half of year = 2060 * (3/100) = 61.8 $
Total interest = 121.8$
Total amount in account at the end of year = 2121.8 $
Answer C
Alternatively , we can use estimation here
To simplify if we assume that compounding was done only once a year , then interest earnerd will be
= 2000 * (6/100)
=120 $
So , we can immediately eliminate options A and B.
The interest earned in option D and E are approximately around 247 and 258 $ ,which will approximately be equal to
effective annual interest rate of 12.5 %. Hence , these options can be eliminated as well .
Answer C
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