Question

If the interest is compounded semiannually, look up on the chart half the rate and twice the years. If the interest is compounded quarterly, look up one-fourth the rate and four times the years. What is the total amount and the amount of interest earned on $6,500 at 6% for 25 years?

Answer 1

if the interest is compounded annually:

$6,500 x (1 + 6%)²⁵ = $27,897

interest earned = $27,897 - $6,500 = $21,397

if the interest is compounded semiannually:

$6,500 x (1 + 3%)⁵⁰ = $28,495

interest earned = $28,495 - $6,500 = $21,995

if the interest is compounded quarterly:

$6,500 x (1 + 1.5%)¹⁰⁰ = $28,808

interest earned = $28,808 - $6,500 = $22,308