What is the compound interest on 1400 compounded semi-annually for five years with a rate of 8%?

Expert Answers

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If you start with 100% of your $1,400, every half year, you add 4%, and will end up with 104%, or 1.04 times your money.  So, for each half-year, you multiply 1.04, and you end up with an exponential equation. After doing this 10 times (twice a year for 5 years), you get:

1400*(1.04)^10 = 2072.34

In general the formula for compound interest is:

A   =   P (1  +  r / n)Yn

where A is what you end up with, P is what you start with, r is the interest rate, n is number of times compounded per year, and Y is years.

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