Financial math Compound Interest

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Financial math Compound Interest

Postby Lucas » Fri May 03, 2013 6:26 am

MYP Math, Financial Mathematics, Compound Interest

How can we calculate the interest paid on a deposit of $37,200 at 4% per annum compounded semi-annually for 5 years?

Thanks
Lucas
 
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Re: Financial math Compound Interest

Postby nicole » Fri May 03, 2013 6:31 am

MYP Mathematics, 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, r is the interest rate per compound period and n is the number of compounding periods.


Regarding your question about the interest paid we will use the following formula



Hope these help!
nicole
 
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Re: Financial math Compound Interest

Postby Lucas » Fri May 03, 2013 6:34 am

Thanks Nicole!!
Lucas
 
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