Question

What will be the difference in the compound interest on rs. 50000 at 12% for one year, when the interest is paid yearly and half yearly ?

Answer 1

when compounded yearly,
principal=₹50,000
r=12%
t=1yr
hence, simple interest for first yr=p*r*t/100
➡₹50,000*12*1/100=₹6000
amount=p+I
➡₹50,000+6000=₹56,000
therefore, compound interest=a+p
➡₹56,000+₹50,000=₹106,000

compounded half yrly,
r=12%p.a=6%per half year
t=1yr
hence, amount=p(1+r/100)t{here,t is considered as power}
➡₹50,000(1+6/100)1
=₹3500
c.i=a+p
➡₹3500+₹50,000
=₹53500

difference=₹106,000-₹53500=₹42,500