Question

Find the difference between compound interest compounded yearly __ 3M ___ _
and half yearly on ~5000 for one year at 10 % p.a.

Answer 1

Answer:

12.5

Step-by-step explanation:

1. When compounded annually, we just have to increment 5000 by 10% which gives 5500.

Interest = 500.

2. When compounded half yearly, the r.o.i becomes half of annual value. i.e 5%.

Now, we increment 5000 twice by 5%

5% of 5000 = 250

Amount after six months = 5250.

For next six months,

5% of 5250 = 262.5

Amount after this period becomes 5512.5

Total interest in this case becomes 512.5

The difference between interests in 1 and 2 is, therefore,

512.5 - 500

=12.5.