Question

Calculate the compound interest on sum of 8000 for 3/2 years at 8%p.a. compounded semi-annually.

Answer 1

The compound interest accumulation formula :

P (1 + i)ⁿ = A

P = principle amount

i = interest rate

n = Time in years

A = accumulated amount

CALCULATIONS

P = 8000

I = 8% / 2 = 4% (we divide by two since interest is compounded semiannually)

n = 3/2 × 2 = 3 (we multiply by two since the interest is compounded semiannually).

Doing the substitution :

8000 × (1.04)³ = 8998.912

Interest = Accumulated amount - principle

= 8998.912 - 8000 = 998.912