How much money will you have at the end of the end of the year if interest is compounded semi-annually at 10 percent on a 600 deposit?

Answer 1

661.5

I got that by using a financial calculator i divided the interest rate by 2 because compounding is semiannually, and multiplied the term (1 year) by 2 because compounding is semiannually. I used 600 as the present value, and solved for the future value. As I recall from college I think that is how it is done. Keep in mind that assumes the initial deposit earns interest for a full year.

Another way:

Simple Interest formula = (p * n * r)/ 100

p - principal

n - number of years

r - rate of interest

So SI for the first 6 months = 600 * 0.5 * 10/100 = 30

Principal at the end of first half year = 630

Now p = 630 because the interest after the first half year is credited to your account.

so SI = 600 * 0.5 * 10/100 = 31.5

Principal at the end of one year = 661.5

Note: I took n as 0.5 because interest is compounded every half year. If it is every quarter you must take n = 0.25 and perform this math 4 times to finish the one year