What is the compound interest earned on Rs. 80000 at 40% per annum in one year, compounded quarterly?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 37128
When interest is compounded quarterly, the yearly rate is divided by 4 and the interest is added 4 times a year, so one year has 4 periods at 10% each.
Rate per quarter \(=40\%\div4=10\%\); periods in one year \(=4\)
Amount \(=80000\times(1.1)^4=80000\times1.4641=117128\)
Compound interest \(=117128-80000=\) Rs. 37128