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October 7th, 2015, 07:39 AM   #1
Joined: Oct 2015
From: canada

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Financial math question

Hey guys, sorry if this is in the wrong thread, first post here,

I have a question I am stuck on and would love some help on.

If you were to invest $12000 today, how much will you have in 25 years at 10 percent ( compounded semi annually )

I know for when its not semi annually it would be

12000 * (1.1)^25
= 130 020

and the answer to the original question is

12000 * 11.467
=137604 (5%, 50 periods)

Just not too sure how that answer was found.
thanks in advanced!
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October 7th, 2015, 07:52 AM   #2
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$P = P_0\left(1 + \dfrac{r}{n}\right)^{nt}$

where $P_0$ = initial investment

$r$ = APR as a decimal

$n$ = number of compounding periods per year

$t$ = number of years

for your problem ...

$P = 12000\left(1 + \dfrac{0.10}{2}\right)^{50}$

$P \approx 137609$
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October 7th, 2015, 08:45 AM   #3
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Essentially, you can use your initial formula but use "half a year" instead of a year. The interest is 10% per year so 5% in a half year. There are 25 years but 50 half years.
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