Discussion
If N is the Compound Interest on ₹10,000.00 for 1 year at 4% per annum, when compounded quarterly then which of the following is correct.
Answer: D
N is greater than 400.
Compounded quarterly, 4% a year means 1% per quarter for 4 quarters:
\[ \begin{aligned} A &= 10000\,(1.01)^{4} \\ &= 10406.04 \\ N &= 406.04 \end{aligned} \]
Simple interest would be exactly 400; compounding adds interest on interest, so the compound interest is a little more than 400. That rules out the three lower ranges.
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