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maths-- compound interest

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find the compund interest on $2500 for one year at 4% per annum compounded half-yearly.

which of these is correct?

$2500(1 + 0.04)^2


$2500(1 + 0.02)^2

The second one. 2500(1+.02)^2

Since the interest is compounded semi-annually you have to divide the annual rate of 4% by 2.

PS, the actual compound interest, which your question asks for, would really be 2500(1+.02)^2 - 2500

ok, thanks

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