If the rate of compound interest is 20% per annum, compounded half-yearly, then what will be the interest on a principal of ₹100000 for two years?
Answer & explanation
Correct answer: option 1
Interest is compounded half yearly,
New rate = \(\frac{20}{2}\) % = 10%
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 100000 [ \(\frac{11}{10}\) × \(\frac{11}{10}\) × \(\frac{11}{10}\) × \(\frac{11}{10}\) - 1 ]
= 100000[ \(\frac{14641}{10000}\) - 1 ]
= 100000 [ \(\frac{4641}{10000}\) ]
= Rs. 46410