00:01
So let's walk through one of each of these in turn.
00:03
So for a, we start off with 1 ,600.
00:06
And then we start earning 9 % interest.
00:11
And that means we're multiplying the original value by 1 plus an extra 9%.
00:15
But then we get to do that six times.
00:17
And the interest compounds.
00:18
So each time we multiply that new number by a bigger one, right? so we get 1 ,600 times six years at 9 % interest.
00:28
We punch that into our calculator and we get 268 .363 .36.
00:39
Now for b, what's really happening is that we're only compounding semi -annually.
00:45
So now we're not earning nine, right? so we have 9 % per year.
00:52
Now we have 4 .5 every six months, right? so this six years is now 12 half years.
01:09
So we're going to be earning a smaller rate of interest.
01:13
We're only earning 4 .5 % but we get to earn it 12 times, right? so the rate is halved, but the number of compounding periods is double...