ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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6
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3
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2
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12
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Detailed explanation-1: -We use the compound interest formula A(n) = P(1 + i)^n. Here i = r/m = 0.12/12, and n = 6 as each month is one period. So A(6) = 1000(1 + 0.12/12)^6 = 1061.52. So after six months there will be $1061.52 in the account.
Detailed explanation-2: -Compounding interest semiannually means that the principal of a loan or investment at the beginning of the compounding period, in this case, every six months, includes the total interest from each previous period.
Detailed explanation-3: -With monthly compounding, for example, the stated annual interest rate is divided by 12 to find the periodic (monthly) rate, and the number of years is multiplied by 12 to determine the number of (monthly) periods.
Detailed explanation-4: -What Is the Monthly Compound Interest Formula in Math? The monthly compound interest formula is used to find the compound interest per month. The formula of monthly compound interest is: CI = P(1 + (r/12) )12t-P where, P is the principal amount, r is the interest rate in decimal form, and t is the time.