If interest is being compounded half yearly, then what sum will amount to Rs 51840 in 2 years at the rate of 40% per annum on compound interest?
Answer & explanation
Correct answer: option 1
The rate of interest = 40% per annum
The amount = Rs 51840
Formula used:
Amount = P x $[1+ (\frac{R}{100})]^2$
The effective time = 2 x 2 = 4 years
The effective rate of interest = $\frac{40}{2}$ = 20% half yearly
51840 = P x $[1+ (\frac{20}{100})]^4$
⇒ 51840 = P x $[\frac{6}{5}]^4$
⇒ 51840 = P x $[\frac{1296}{625}]$
⇒ P = $\frac{51840 \times 625}{1296}$
= 25000
Thus, the sum is Rs 25,000