Manually calculate the compound interst on an investment of $12,500 at 7.5% interest compound semiannually for 2 year.
$1,983.00
To manually calculate compound interest, you can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = final amount (including principal and interest)
P = principal amount (initial investment)
r = annual interest rate (in decimal)
n = number of times that interest is compounded per year
t = number of years
In this case, you have:
P = $12,500
r = 7.5% = 0.075 (in decimal)
n = 2 (compounded semiannually, so twice a year)
t = 2 years
Substituting these values into the formula:
A = $12,500 * (1 + 0.075/2)^(2*2)
First, simplify the calculation inside the parentheses:
A = $12,500 * (1 + 0.0375)^(4)
Next, raise the result to the power of 4:
A = $12,500 * (1.0375)^(4)
Using a calculator, calculate:
A ≈ $12,500 * 1.157625
A ≈ $14,470.31
The compound interest on an investment of $12,500 at 7.5% interest compounded semiannually for 2 years is approximately $1,970.31.