What is the amount in an account if $2,000 is invested at 6.125% compounded semi-annually for 2 years?

How can I find different ways of doing math problems like this that will make it easier to do.

It would total to $2,256.49 before taxes. The actual formula for determining this requires a bit of algebra experience but I imputed a bunch of formulas into Microsoft Excel to determine balances over periods of time as well as the initial investment needed to get to a certain amount in a given number of years. Let me know if your interested. But heres the formula for periodic compound interest just in case.

B= P(1+(r/n)^(n*t)

B: Balance
P: Principal (amount invested/borrowed)
r:Interest Rate in decimal form i.e. 6.125% would be .06125
haha looks pretty complicated but its not.
n: # of times per year its compounded which in your case is 2
t:Time in years

www.bankrate.com/brm/popcalc2.asp

Your need to split this problem in two parts:

1. Find the Effective Annual Rate (EAR)
2. Find the future value on your principal amount

1. EAR=(1+Quoted Rate/m) ^m - 1
2. Take 2,000 + (2000*EAR)


In your example,
1. EAR=(1+0.06125/2)^2-1
EAR= 0.0622 or 6.22%
2. 2000+(2000 0*0.0622)=2,124.3758

Hope that helps. Take any Essentials of Corporate Finance textbook and go through the chapter on the Time Value of Money.

Exell says $2256 which is wrong
A bank would pay you $2253, because the rate of 6.125%pa is AFTER the specified compounding.
My bank says it is compounding every day, but it still only pays me 6.125% at the end of the year.

Also do not ask the bank clerks. They know less than you. Just look at how much they actually give you.