What will be the compound interest on Rs.24,000 at 20% for 9 months, compounded quarterly?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 3783
When interest is compounded quarterly, the yearly rate is divided by 4 and every quarter counts as one period: \(A=P\left(1+\frac{r}{100}\right)^{n}\) with \(r\) the rate per quarter and \(n\) the number of quarters.
Rate per quarter \(\displaystyle =\frac{20\%}{4}=5\%\)
Number of quarters in 9 months \(=3\)
Amount after 3 quarters \(=24000\times(1.05)^{3}=24000\times1.157625=27783\)
Compound interest, the amount minus the principal \(=27783-24000=\) Rs. 3783