Once again, suppose that on January 1, 2016, you invest $1,000 in an account that pays 5% interest. As before, you have plans to withdraw $300 after one year and to deposit and additional $1,000 after two years. However, in this case, let's assume that interest is paid and compounded twice each year (1.o., semiannually). Does this change the rate at which money accumulates in your account? The relevant calculations appear in Table 4A 2. To find the interest for each six-month period, multiply the beginning initial) balance for the six months by half of the stated 5% interest rate (see column 3 of Table 4A 21 You can see that larger returns are associated with more frequent compounding Compare the end of 2018 account balance at 5% compounded annually with the end of 2018 account balance at 5 pounding results in a higher balance ($1,879,19 versus 51875.85). Clearly, with compounded semiannually. The semiannual com semiannual compounding, you are effectively earning a higher rate of interest than when interest compounds just once per year. In other words, the trus rute of interest is greater than the 5% stated rate