2.1k views
4 votes
Dara invests $800 at 12.5% per

annum compound interest compounded
half-yearly .What in his amount of
interest at the end of the first year?

need help asap xd


User Algrid
by
8.1k points

1 Answer

3 votes

Answer:

By the end of the first year Dara will have $903.125 in his account.

Explanation:

Since this a compounded interest formula, it means that the amount invested grows exponentially overtime. In order to calculate the total of money over a period of time we must use the following formula:

M(t) = M(0)*(1 + r/n)^(n*t)

Where M(t) is the amount of money in "t" years, M(0) is the amount invested, r is the anual interest rate, n is the compound period over a year and t is the time elapsed in years.

In this problem the amount is compounded half-yearly, this means that for every year that passes the money is compounded twice, therefore n is equal to 2. Applying the data from the problem to the formula, we have:

M(1) = 800*(1 + 0.125/2)^(2*1)

M(1) = 800*(1.0625)^(2)

M(1) = 800*(1.0625)^(2) =903.125

By the end of the first year Dara will have $903.125 in his account.

User Abl
by
9.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories