Assuming half yearly compounding frequency. How many periods ("n") are there in 1 years

Question

Assuming half yearly compounding frequency.  How many periods ("n") are there in 1 years

BlackTom AI · Accepted Answer

The question asks for the number of compounding periods, n, in 1 year with half-yearly (semiannual) compounding.
First, recall the relationship between time, compounding frequency, and periods: n equals the number of compounding intervals within the total time horizon.
With semiannual compounding, there are two compounding periods per year because the interest is applied twice within each 12-month year.
Therefore, over a span of 1 year, the count of periods accumulates as: 1 year × 2 periods per year = 2 periods total.
Since this is a short-answer format and no answer choices are provided, consider this the method to determine n for any given time in years when the compounding frequency is semiannual: multiply the number of years by 2.
If you were converting between variables, you could also use the general formula n = m × t, where m is the number of compounding periods per year and t is the number of years.
In this scenario, m = 2 and t = 1, so n = 2.
Be mindful that if the time horizon changed (for example, 3/4 of a year), you would get n = 2 × 0.75 = 1.5, which would need to be interpreted in context since partial periods may be treated differently depending on the convention used (some problems round to the nearest whole period, others account for partial periods).

BFIN011 Week 1: Practice Quiz

Assuming half yearly compounding frequency. How many periods ("n") are there in 1 years

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