Question

What is the compound interest on Rs. 4000 for 1 12 years if interest is at 10% p.a. compounded
half- yearly?

Answer 1

Answer:

Principal P=Rs.4,000. Since the interest is compounded half-yearly the number of conversion periods in 1

2

1

years are 3. Also the rate of interest per conversion period (6 months) is 10% ×

2

1

=5% (0.05 in decimal).

Thus the amount A

n

(in Rs.) is given by

A

n

=P(1+i)

n

A

3

=4,000(1+0.05)

3

=4,630.50

The compound interest is therefore Rs.(4,630.50−4,000)

=Rs.630.50.