Mr. Zahir bought a 1-year BDT 10,000 certificate of deposit that paid interest at an annual rate of 8 percent compounded semiannually. What was the total amount of interest paid on this certificate at maturity?

Question: Mr. Zahir bought a 1-year BDT 10,000 certificate of deposit that paid interest at an annual rate of 8 percent compounded semiannually. What was the total amount of interest paid on this certificate at maturity?

Solution:
Principal (P) = 10,000 BDT
Annual interest rate = 8%
Compounded semiannually
⇒ 2 times per year

∴ Rate per half-year = (8/2) %
= 4% = 0.04
Number of periods = 2

Compound amount
A = P(1 + r)ⁿ
A = 10,000 × (1.04)²
= 10,000 × 1.0816
= 10,816

∴ Interest = A - P
= 10,816 - 10,000
= 816