Compound Interest when Interest is Compounded Half-Yearly

We will learn how to use the formula for calculating the compound interest when interest is compounded half-yearly.

Computation of compound interest by using growing principal becomes lengthy and complicated when the period is long. If the rate of interest is annual and the interest is compounded half-yearly (i.e., 6 months or, 2 times in a year) then the number of years (n) is doubled (i.e., made 2n) and the rate of annual interest (r) is halved (i.e., made \(\frac{r}{2}\)).  In such cases we use the following formula for compound interest when the interest is calculated half-yearly.

If the principal = P, rate of interest per unit time = \(\frac{r}{2}\)%, number of units of time = 2n, the amount = A and the compound interest = CI

Then

A = P(1 + \(\frac{\frac{r}{2}}{100}\))\(^{2n}\)

Here, the rate percent is divided by 2 and the number of years is multiplied by 2

Therefore,  CI = A - P = P{(1 + \(\frac{\frac{r}{2}}{100}\))\(^{2n}\) - 1}

Note:

A = P(1 + \(\frac{\frac{r}{2}}{100}\))\(^{2n}\) is the relation among the four quantities P, r, n and A.

Given any three of these, the fourth can be found from this formula.

CI = A - P = P{(1 + \(\frac{\frac{r}{2}}{100}\))\(^{2n}\) - 1} is the relation among the four quantities P, r, n and CI.

Given any three of these, the fourth can be found from this formula.


Word problems on compound interest when interest is compounded half-yearly:

1. Find the amount and the compound interest on $ 8,000 at 10 % per annum for 1\(\frac{1}{2}\) years if the interest is compounded half-yearly.

Solution:

Here, the interest is compounded half-yearly. So,

Principal (P) = $ 8,000

Number of years (n) = 1\(\frac{1}{2}\) × 2 = \(\frac{3}{2}\) × 2 = 3

Rate of interest compounded half-yearly (r) = \(\frac{10}{2}\)% = 5%

Now, A = P (1 + \(\frac{r}{100}\))\(^{n}\)

A = $ 8,000(1 + \(\frac{5}{100}\))\(^{3}\)

A = $ 8,000(1 + \(\frac{1}{20}\))\(^{3}\)

A = $ 8,000 × (\(\frac{21}{20}\))\(^{3}\)

A = $ 8,000 × \(\frac{9261}{8000}\)

A = $ 9,261 and

Compound interest = Amount - Principal

                          = $ 9,261 - $ 8,000

                          = $ 1,261

Therefore, the amount is $ 9,261 and the compound interest is $ 1,261

 

2. Find the amount and the compound interest on $ 4,000 is 1\(\frac{1}{2}\) years at 10 % per annum compounded half-yearly.

Solution:

Here, the interest is compounded half-yearly. So,

Principal (P) = $ 4,000

Number of years (n) = 1\(\frac{1}{2}\) × 2 = \(\frac{3}{2}\) × 2 = 3

Rate of interest compounded half-yearly (r) = \(\frac{10}{2}\)% = 5%

Now, A = P (1 + \(\frac{r}{100}\))\(^{n}\)

A = $ 4,000(1 + \(\frac{5}{100}\))\(^{3}\)

A = $ 4,000(1 + \(\frac{1}{20}\))\(^{3}\)

A = $ 4,000 × (\(\frac{21}{20}\))\(^{3}\)

A = $ 4,000 × \(\frac{9261}{8000}\)

A = $ 4,630.50 and

Compound interest = Amount - Principal

                          = $ 4,630.50 - $ 4,000

                          = $ 630.50

Therefore, the amount is $ 4,630.50 and the compound interest is $ 630.50

Compound Interest

Compound Interest

Compound Interest with Growing Principal

Compound Interest with Periodic Deductions

Compound Interest by Using Formula

Compound Interest when Interest is Compounded Yearly

Problems on Compound Interest

Variable Rate of Compound Interest

Practice Test on Compound Interest


Compound Interest - Worksheet

Worksheet on Compound Interest

Worksheet on Compound Interest with Growing Principal

Worksheet on Compound Interest with Periodic Deductions


8th Grade Math Practice 

From Compound Interest when Interest is Compounded Half-Yearly to HOME PAGE




Didn't find what you were looking for? Or want to know more information about Math Only Math. Use this Google Search to find what you need.



New! Comments

Have your say about what you just read! Leave me a comment in the box below. Ask a Question or Answer a Question.

Share this page: What’s this?

Recent Articles

  1. Expanded form of Decimal Fractions |How to Write a Decimal in Expanded

    Jul 22, 24 03:27 PM

    Expanded form of Decimal
    Decimal numbers can be expressed in expanded form using the place-value chart. In expanded form of decimal fractions we will learn how to read and write the decimal numbers. Note: When a decimal is mi…

    Read More

  2. Worksheet on Decimal Numbers | Decimals Number Concepts | Answers

    Jul 22, 24 02:41 PM

    Worksheet on Decimal Numbers
    Practice different types of math questions given in the worksheet on decimal numbers, these math problems will help the students to review decimals number concepts.

    Read More

  3. Decimal Place Value Chart |Tenths Place |Hundredths Place |Thousandths

    Jul 21, 24 02:14 PM

    Decimal place value chart
    Decimal place value chart are discussed here: The first place after the decimal is got by dividing the number by 10; it is called the tenths place.

    Read More

  4. Thousandths Place in Decimals | Decimal Place Value | Decimal Numbers

    Jul 20, 24 03:45 PM

    Thousandths Place in Decimals
    When we write a decimal number with three places, we are representing the thousandths place. Each part in the given figure represents one-thousandth of the whole. It is written as 1/1000. In the decim…

    Read More

  5. Hundredths Place in Decimals | Decimal Place Value | Decimal Number

    Jul 20, 24 02:30 PM

    Hundredths Place in Decimals
    When we write a decimal number with two places, we are representing the hundredths place. Let us take plane sheet which represents one whole. Now, we divide the sheet into 100 equal parts. Each part r…

    Read More