Calculate compound interest of 2000 $f o r a p e r i o d$ 1 $y e a r, c o m p o u n d e d s e m i - a n n u a l l y a t t h e r a t e$ 0.2$% per six months.

5.008$

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6.008$

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7.008$

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8.008$

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Solution

The correct option is D 8.008 $I n t h e a b o v e q u e s t i o n t h e p r i n c i p a l a m o u n t i s$ $2000$ , the interest rate is $0.2$ and the duration $t = 1$ year. However it is applied semi-annually, hence

$A m o u n t = P \times (1 + \frac{r}{100})^{n \times t}$
$= 2000 (1 + \frac{0.2}{100})^{2 \times 1}$
$= 2000 (1.002)^{2}$
$= 2000 (1.004004)$
$= 2008.008$ .
Hence the interest earned is $2008.008 - 2000 =$ 8.008$

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