Question

Vijay lent 20,500 for 2 years at 25% per annum compounded annually. How much more
could he earn if the interest is compounded half yearly?​

Answer 1

p=20500

r=25% per year = 0.25 per year

= 25%/2 per half year = 12.5%

= 0.125 per half year

n= 2 years = 2×2 half year = 4 half years

A = p(1+r)ⁿ

compounded annually:

r= 0.25; n=2 ; p=20500

A = 20500(1+.25)² = 32031.25

compounded half yearly:

r= 0.125; n=4 ; p=20500

A1 = 20500(1+0.125)⁴ = 32837.04

A1 -A= 805.78/-

Vijay earns ₹805.78/- more when compounded half yearly