Question

Leona bought a $1$-year, $\$10,000$ certificate of deposit that paid interest at an annual rate of $8$ percent compounded semiannually. What was the total amount of interest paid on this certificate at maturity?

• A. $\$$10464
• B. $\$864$
• C. $\$816$
• D. $\$800$
• E. $\$480$

Answer 1

The correct option is C $\$816$

Given, $P=\$10,000,R=8\%,T=1year$

We know that, amount in compound interest $=P{(1+\frac{R}{100})}^n$

Here, the interest is compounded half-yearly.

Hence, rate of interest will be $4\%$ per half year and $n=2$

$=10000{(1+\frac{4}{100})}^2$

$=10000(1.04{)}^2$

$=10000\left(1.0816\right)$

$=10816$

Hence, interest $=10816-10000$

$=$816$

Hence, the interest paid at the time of maturity is $\$816$.