Discussion

Find the compound interest on Rs. 25000 in 2 years at 4% per annum. The interest being compounded half yearly.

Answer: C

\[ A = P\left(1 + \frac{R}{100}\right)^{n}, \qquad \text{CI} = A - P, \qquad \text{SI} = \frac{PRn}{100} \]

Half-yearly compounding halves the rate and doubles the number of periods.

\[ \text{rate} = \frac{4}{2} = 2\% \text{ per half-year}, \qquad n = 2 \times 2 = 4 \]

\[ A = 25000 \times (1.02)^{4} = 25000 \times 1.08243216 = 27{,}060.804 \]

\[ \text{CI} = 27060.804 - 25000 = \text{Rs. } 2060.804 \]

Annual compounding at 4% would give only Rs. 2040 - compounding more often always earns a little more.

No comment is present. Be the first to comment.

Loading…