A building society adds interest monthly to investors' accounts even though interest rates are expressed in annual terms. The current rate of interest is 6% per annum.
An investor deposits $1,000 on 1 January. How much interest will have been earned by 30 June?
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capital budgeting
10y ago#1The interest each month is 6/12 = 0.5% (or 0.005).
From 1 January to 30 June is 6 months.
So $1,000 will have grown to 1,000 x (1.005)^6 = 1,030.38
So the interest is the extra $30.38.
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