Compound Interest Financial mathematics

[William]

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

[nicole]

IB Mathematical Studies, Financial Mathematics, Compound Interest

Compounded semi-annually means interest is added to the principal semi-annually.
The general compounding formula is:



and

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


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!

[William]

Thanks Nicole!