CALC

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If 42600 dollars is invested at an interest rate of 5 percent per year, compounded semiannually.

What does semiannually mean? to find the values at 5 years would you just multiply?

  • CALC -

    Semiannually means that interest is paid and compounded every six months. The amount added on is 2.5% (1/2 of 5%) each time.

    To get the value after five years, multiply by (1.025)^10 = 1.2800845. Note that that is more than 1.25 you would get by not compounding.

    You end up with
    $53,531.60. That might be a few cents off, depending upon how pennies get rounded off each time.

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