What is the difference between compound interest on 5000 for 1 1 2 years at 4% per annum according as the interest is compounded yearly or half yearly?

in yearly(1.5 yr or 1yr+1/2yr) 5000+5000*4%+5200*4%*0.5=5304 in half yearly 5000+5000*2%+5100*2%+5202*2%=5306.04 so difference

5306.04-5305=2.04

Saving

The power of compounding grows your savings faster

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The sooner you start to save, the more you'll earn with compound interest.

Compound interest is the interest you get on:

• the money you initially deposited, called the principal
• the interest you've already earned

For example, if you have a savings account, you'll earn interest on your initial savings and on the interest you've already earned. You get interest on your interest.

This is different to simple interest. Simple interest is paid only on the principal at the end of the period. A term deposit usually earns simple interest.

Save more with compound interest

The power of compounding helps you to save more money. The longer you save, the more interest you earn. So start as soon as you can and save regularly. You'll earn a lot more than if you try to catch up later.

For example, if you put $10,000 into a savings account with 3% interest compounded monthly:

• After five years, you'd have $11,616. You'd earn $1,616 in interest.
• After 10 years you'd have $13,494. You'd earn $3,494 in interest.
• After 20 years you'd have $18,208. You'd earn $8,208 in interest.

Compound interest formula

To calculate compound interest, use the formula:

A = P x (1 + r)n

A = ending balanceP = starting balance (or principal)r = interest rate per period as a decimal (for example, 2% becomes 0.02)

n = the number of time periods

How to calculate compound interest

To calculate how much $2,000 will earn over two years at an interest rate of 5% per year, compounded monthly:

1. Divide the annual interest rate of 5% by 12 (as interest compounds monthly) = 0.0042

2. Calculate the number of time periods (n) in months you'll be earning interest for (2 years x 12 months per year) = 24

3. Use the compound interest formula

A = $2,000 x (1+ 0.0042)24A = $2,000 x 1.106

A = $2,211.64

Lorenzo and Sophia compare the compounding effect

Lorenzo and Sophia both decide to invest $10,000 at a 5% interest rate for five years. Sophia earns interest monthly, and Lorenzo earns interest at the end of the five-year term.

After five years:

• Sophia has $12,834.
• Lorenzo has $12,500.

Sophia and Lorenzo both started with the same amount. But Sophia gets $334 more interest than Lorenzo because of the compounding effect. Because Sophia is paid interest each month, the following month she earns interest on interest.

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Q:

The compound interest on a certain sum of money at 21% for 2 years is ₹9,282. Its simple interest (in ₹) at the same rate and for the same period is:

Answer & Explanation Answer: B) 8,400

Explanation:

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Q:

₹4,000 is given at 5% per annum for one year and interest is compounded half yearly. ₹2,000 is given at 40% per annum compounded quarterly for 1 year. The total interest received is nearest to:

Answer & Explanation Answer: C) ₹1,130.70

Explanation:

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Q:

A sum amounts to ₹18,600 after 3 years and to ₹27,900 after 6 years, at a certain rate percent p.a., when the interest is compounded annually. The sum is:

Answer & Explanation Answer: B) Rs. 12,400  

Explanation:

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