metallicafan wrote:An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?
A $17000
B $18000
C $19000
D $20000
E $21000
A fast way to solve it? Thanks!
20% interest compounded semi-annually means that 10% is earned every 6 months.
We can plug in the answers, which represent the initial investment.
Problems about compound interest tend to involve VERY ROUND numbers.
Thus, we should start with
D:
1st 6 months: 20000 + 2000 = 22000.
Next 6 months: 22000 + 2200 = 24200.
Next 6 months: 24200 + 2420 ≈ 26600.
Next 6 months: 26600 + 2660 ≈ 29200.
Success!
The correct answer is
D.
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