## Compound Interest Financial mathematics

Number and algebra, Descriptive statistics, Logic, sets and probability, Statistical applications, Geometry and trigonometry, Mathematical models, Introduction to differential calculus.

### Compound Interest Financial mathematics

IB Mathematical Studies, Compound Interest

How can we calculate the interest paid on a deposit of $5,000 at 4% per annum compounded semi-annually for 24 months? Thanks William Posts: 0 Joined: Mon Jan 28, 2013 8:07 pm ### Re: Compound Interest Financial mathematics IB Mathematical Studies, Financial Mathematics, Compound Interest Compounded semi-annually means interest is added to the principal semi-annually. The general compounding formula is: $F=P \cdot (1+ \frac{r}{100})^n$ and $I=P \cdot (1+ \frac{r}{100})^n –P$ Where F is the future value of the investment, P the principal (=$5,000), r is the interest rate per compound period (4/2=2%) and n is the number of compounding periods(24/6=4).

Regarding your question about the interest paid we will use the following formula
$I=5,000 \cdot (1+ \frac{2}{100})^4 –5000=412.16$

The guidelines for doing this exercise directly to GDC Casio FX-9860 is
TVM -> F2: Compound Interest -> n=4, I%=4, PV=5,000, P/Y=2, C/Y=2 and then press FV and get your result with a negative sign is FV and when this subtracted from the principal you get the interest.

Hope these help!
nicole

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Joined: Mon Jan 28, 2013 8:10 pm

### Re: Compound Interest Financial mathematics

Thanks Nicole!
William

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Joined: Mon Jan 28, 2013 8:07 pm