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Hi Tutor
I watched your lecture but I have a doubt
$1,000 is invested for three years at a 4% six monthly interest rate.
At the end of the three years, what is the worth of the investmentI applied your method
1000*(1.04)^2 = 1081.6
APR = 8.16 % : Does this mean that after 3 years the value is 1081.6 or after 1 year the value is 1081. 6 ?
The figure you have arrived at is the amount after 1 year (you have taken it to the power of 2 and there are 2 periods of six months in a year,
To get the amount after 3 years (which is 6 periods of six months) you need to do
1000*((1.04^6))The APR is indeed 8.16% but this is the annual rate and is not the interest for 3 years.
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