Question

Peter invests $12500 for 5 years at 12 percent per annum,compounded monthly foe the first two years, and 14 percent per annum compounded simiannually for the next three years. How much will Peter receive after five years?

Answer 1

Solve it as two problems.
Principal, P = $12500
1. 2 years at 12% p.a. compounded monthly
2. 3 years at 14% p.a. compunded semi-annually.

1.
monthly interest = 12%/12 = 1%
R=1+0.01=1.01
n=2/(1/12)=24
Amount after 2 years,
A2=PR^24 = $12500*1.01^24 = $15871.68

2.
semi-annual interest = 14%/2 = 7%
R = 1+0.07 = 1.07
n=3/(1/0.5)=6
Final amount,
A = A2*R^6 = $15,871.68*1.07^6 = $23,819.12