Explanation

In question, the phrase "annual rate of 6 percent compounded semiannually" means that, in half a year, the investment value increases by 3%. So, after the first six months, the $1,000 is worth Since this is compound interest and not simple interest, over the next six months, that value - the and not just the original 1,000 - increases at the same rate, so at the end of that period, we have . At the end of two years, four "compoundings," we have a total value of



First, we can calculate . That means that, halfway through, the total value is . The interest paid by that point is $60.90. Therefore, the total interest over the entire period will be roughly double (and at least double), leaving only one viable answer.

The correct answer choice is (A).