Investment Finding compound annually , semiannually, or monthly interest

Question

One hundred dollar is placed in an account that pays 12 percent . How much will be in the account after one year if interest is compound annually, semiannually, or monthly?

 

One hundred dollar is received after one year . What is the present value of this amount if you can earn 12 percent compound annually, semiannually, or monthly?

 

Answer 1

Use the compound interest formula.

 

A = P(1 + (r/n))^nt

 

where:

A = amount accumulated

P = investment

r = interest rate

t = time

n = number of times compounded per year

 

Given:

P = 100

r = 0.12

t = 1

 

n = 1   (annually)

n = 2   (semiannually)

n = 12   (monthly)

 

Plug in these values to find how much money is accumulated.