Q:A building society adds interest to investors account even though interest rates are expressed in annual terms. The current rate of interest is 6% per annum.
An investor deposits $1000 on 1st January. How much interest will have been earned by 30th June?
A 30.00
B 30.38
C 60.00
D 300
I am applying this formula : [ (1+r) ^ n -1 ] x 100
Please explain this answer to me in simple words...
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Effective Rate
11y ago#1You have not typed the whole question - I assume that they add interest monthly.
Assuming that to be the case, the monthly interest is 6%/12 = 0.5% (or 0.005)
Adding interest for 6 periods at 0.5% per period comes to:
1000 x (1.005)^6 = 1030.38
So the interest added is 30.38
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