Annual interest rate: 6.5%
Compounding frequency: Semi-annually (twice a year)
Investment duration: 3 years
1. Number of compounding periods:
Since compounding happens twice a year for 3 years, the total number of compounding periods is:
Number of periods = Frequency * Duration = 2 times/year * 3 years = 6 periods
2. Interest rate per compounding period:
The annual interest rate needs to be divided by the compounding frequency to get the interest rate per period:
Interest rate per period = Annual rate / Frequency = 6.5% / 2 = 3.25%
Therefore, for an investment at 6.5% per year compounded semi-annually for 3 years:
The number of compounding periods is 6.
The interest rate per compounding period is 3.25%.
