If $12,000 is invested at an annual interest rate of 6 percent, compounded semiannually, what will the total amount be after 4 years, in dollars?
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Tricky wording but good practice
thanks for the answer
wait why is it 8 and not 4? i thought 4 years = 4 periods
semiannually means twice a year, so 4 years x 2 periods per year
ohh right, got it. thanks!
is the 0.06/2 because you split the rate across the two periods? trying to make sure i'm not just memorizing the formula
yeah, each half-year gets half the annual rate
What it tests
Your ability to spot and extend arithmetic and geometric sequences and work with recursive definitions.
Common trap
Off-by-one errors in indexing (a₀ vs a₁) or confusing an arithmetic difference with a geometric ratio.