Compound interest on ₹16000 at 20% per annum for 9 months, compounded quarterly is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹2522
Compounded quarterly, the yearly rate is split into four (20% ÷ 4 = 5% a quarter), and 9 months make 3 quarters. The interest of each quarter is added to the sum before the next quarter’s interest is worked out.
After the 1st quarter: \(16000+800=16800\)
After the 2nd quarter: \(16800+840=17640\)
After the 3rd quarter: \(17640+882=18522\)
Compound interest \(=18522-16000=2522\), that is, ₹2522