Up to this point, we have implicitly assumed that the number of periods in quest

ion matches to a multiple of the compounding period. That means that the point i
n the future is also a point where interest accrues. But what happens if we are
dealing with fractional time periods?
Compounding periods can be any length of time, and the length of the period affe
cts the rate at which interest accrues.
Compounding Interest
The effect of earning 20% annual interest on an initial $1,000 investment at var
ious compounding frequencies.
Suppose the compounding period is one year, starting January1, 2012. If the prob
lem asks you to find the value at June 1, 2014, there is a bit of a conundrum. T
he last time interest was actually paid was at January 1, 2014, but the time-val
ue of money theory clearly suggests that it should be worth more in June than in
January.
In the case of fractional time periods, the devil is in the details. The questio
n could ask for the future value, present value, etc., or it could ask for the f
uture balance, which have different answers.
Future/Present Value
If the problem asks for the future value (FV) or present value (PV), it doesn't
really matter that you are dealing with a fractional time period. You can plug i
n a fractional time period to the appropriate equation to find the FV or PV. The
reasoning behind this is that the interest rate in the equation isn't exactly t
he interest rate that is earned on the money. It is the same as that number, but
more broadly, is the cost of not having the money for a time period. Since ther
e is still a cost to not having the money for that fraction of a compounding per
iod, the FV still rises.
Account Balance
The question could alternatively ask for the balance of the account. In this cas
e, you need to find the amount of money that is actually in the account, so you
round the number of periods down to the nearest whole number (assuming one perio
d is the same as a compounding period; if not, round down to the nearest compoun
ding period). Even if interest compounds every period, and you are asked to find
the balance at the 6.9999th period, you need to round down to 6. The last time
the account actually accrued interest was at period 6; the interest for period 7
has not yet been paid.
If the account accrues interest continuously, there is no problem: there can't b
e a fractional time period, so the balance of the account is always exactly the
value of the money.

Source: Boundless. Calculating Values for Fractional Time Periods. Boundless Accou
nting. Boundless, 21 Jul. 2015. Retrieved 25 Sep. 2015 from https://www.boundles
s.com/accounting/textbooks/boundless-accounting-textbook/the-time-value-of-money
-10/additional-detail-on-present-and-future-values-68/calculating-values-for-fra
ctional-time-periods-316-1470/