COMPOUND INTEREST"URGENT PLS.."
Asked by | 1st Apr, 2010, 08:31: PM
Principal = 5000, Rate = 10% per annum, Time 1.5 yrs.
Now, it's compounded half yearly.
So if interest rate is 10% per annum, it's 5% per semiannually.
So compound interest is 5% per semiannually.
So amount at the end of half year = 5000 (1 + 0.05) = 5000(1.05) = 5250.
Now this amount is principal for next half year and so on.
So at the end of 1 yr = 5250x1.05 = 5512.5
and at the end of 1 and 1/2 year = 5512.5x1.05 = 5788.125
This can be calculated by simple formula.
Formula for calculating compound interest:
- P = principal amount (initial investment)
- r = annual nominal interest rate (as a decimal)
- n = number of times the interest is compounded per year
- t = number of years
- A = amount after time t
Using this we can directly calculate,
A = (5000)(1 + 0.10/2)(1.5x2) = 5788.125
Similarly for second case,
A = (2000)(1 + 0.12/2)(1x2) = 2247.2
Answered by | 2nd Apr, 2010, 06:37: AM
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