Actuarial Science 2053 Lecture Notes - Lecture 8: Savings Account, Interest, Raw Image Format
20 Jan 2016
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The interest earned in any given period of time is added to the principal and it thereafter earns interest: the interest is said to be compounded . Your interest earns interest, as well as the principal. This is the time between two successive interest calculations for example, if interest is compounded quarterly (i. e. interest is calculated and paid 4 times a year), the interest period = Interest compounded semiannually => interest period is usually 6 months. Interest compounded monthly => interest period is 1 month. Interest can be earned more than once a year! Determine the interest earned on ,000 over a. 1-year period if interest is calculated at 6%, compounded quarterly. S = accumulated value of p n = term of investment in interest periods m = number of interest periods per year jm = nominal rate of interest, compounded m-times a year i = interest rate per interest period.
