Question

Abraham Ace invested ₱200,000 at 14% interest compounded semi-annually for 8 years. What is the amount of compound interest Abraham earned?

Answer 1

Givens.

• The principal is 200,000.

,

• The interest rate is 14%.

,

• The time is 8 years.

,

• The compounding periods per year are n = 2.

Use the compound interest formula

$A=P(1+\frac{r}{n})^{nt}$

Use the given values to find A.

$\begin{gathered} A=200,000\cdot(1+\frac{0.14}{2})^{2\cdot8} \\ A=200,000\cdot(1+0.07)^{16} \\ A=200,000(1.07)^{16} \\ A\approx590,432.75 \end{gathered}$

But, A refers to the final amount including principal plus interest. Let's subtract it to find the amount of interest.

$I=590,432.75-200,000=390,432.74$

Therefore, the amount of compound interest earned is $390,432.74.