If we invest money for 10 years at 8% interest, compounded semi-annually, we are really investing money for 20 six-month periods, during which we receive 4% interest each period.

Question

Quizplus · Accepted Answer

This is true because when we compound semi-annually, our investment is split into 20 six-month periods, during each of which we receive 4% interest. Therefore, we are effectively investing for 20 periods at 4% interest each, which equals 10 years at 8% interest compounded semi-annually.

If We Invest Money for 10 Years at 8% Interest