Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

If you borrow $10,000 at an annual interest rate of 8\% compounded semiannually, what is the amount of interest charged for the first 6 months?

$800

$200

$400

$500

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Verified step by step guidance

Understand the problem: You are calculating the interest charged for the first 6 months on a loan of $10,000 at an annual interest rate of 8%, compounded semiannually.

Identify the formula for calculating interest for a single compounding period: $ I = P \times r $, where $ I $ is the interest, $ P $ is the principal, and $ r $ is the interest rate per compounding period.

Determine the interest rate per compounding period: Since the annual interest rate is 8% and the interest is compounded semiannually, divide the annual rate by 2. $ r = \frac{8\%}{2} = 4\% $ or $ 0.04 $ in decimal form.

Substitute the values into the formula: $ I = 10,000 \times 0.04 $. This will give the interest charged for the first 6 months.

Perform the multiplication to find the interest amount. The result will be the interest charged for the first 6 months.