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Question

How much interest will be accrued on an account that has a principal of $1000. that is compounded twice a year at a rate of 2% after one and a half years?

Answer 1

The formula to find compound interest is:

A = P*(1 + r/n)^n*t

A = Principal + Interest

P = Principal

r = interest rate as a decimal

n = number of compounding units

P = $1,000

r = 0.02

n = 2

t = 1.5

A = 1000*(1 + 0.02/2)^2*1.5

A = 1000*(1.01)³

A = 1000*1.03030

A = $1,010

A = Principal + Interest

1010 = 1000 + Interest

Interest = $10.00

Answer 2

I = 1000(1 + 0.02/2)^2·1.5·- 1000 = $30.30