An amount of P1,000 becomes P1,608.44 after 4 years compounded bimonthly. Find the nominal interest. A. 11.89 % B. 12.00 % C. 12.08 % D. 12.32 %

The correct answer is A. 11.89 %.

The formula for compound interest is:

$A = P(1 + r/n)^nt$

where:

• $A$ is the final amount
• $P$ is the principal amount
• $r$ is the annual interest rate
• $n$
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  is the number of times interest is compounded per year
• $t$ is the number of years

In this case, we are given that $P = 1000$, $A = 1608.44$, $t = 4$, and $n = 2$. We are asked to find $r$.

Substituting these values into the formula, we get:

$1608.44 = 1000(1 + r/2)^8$

$1.60844 = (1 + r/2)^8$

$log(1.60844) = log((1 + r/2)^8)$

$log(1.60844) = 8log(1 + r/2)$

$0.21936 = 8log(1 + r/2)$

$0.02742 = log(1 + r/2)$

$1 + r/2 = 10^{0.02742}$

$r/2 = 10^{0.02742} – 1$

$r = 2(10^{0.02742} – 1)$

$r = 0.1189$

Therefore, the nominal interest rate is 11.89%.

The other options are incorrect because they do not match the calculated interest rate.