What if Jennifer were to invest $2,750 today, compounded semiannually, with an annual interest rate of 5.25%. What amount of interest will Jennifer earn in one year?

Interest earned = $146.27

Explanation:

Giving the following information:

Initial investment = $2,750

Interest rate = 5.25% compounded semianually.

First, we need to calculate the final value for the first year.

FV = PV * (1+i) ^n

n=2

i = 0.0525/2 = 0.02625

PV = 2,750

FV = 2,750 * (1.02625) ^2

FV = $2,896.27

Interest earned = 2,896.27 - 2,750 = $146.27