What is the compound interest on the sum of ₹15625 for 2 years at the rate of 12% per annum, if the interest is 8 months is compounded ?
Answer & explanation
Correct answer: option 2
Interest is compounded 8 monthly
New rate = 12% × \(\frac{8}{12}\) = 8%
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 15625 [ 1 + \(\frac{8}{100}\) ]³ - 15625
= 15625 [ \(\frac{27}{25}\) × \(\frac{27}{25}\) × \(\frac{27}{25}\) - 1 ]
= 15625 [ \(\frac{19683}{15625}\) - 1 ]
= 15625 [ \(\frac{4058}{15625}\) ]
= 4058