Rs 25000 is invested at the rate of 12% per annum for two years, the interest being compounded every eight months. Find the compound interest.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs 6492.80
When interest is compounded every eight months, the rate for one period is the yearly rate times \(\displaystyle \frac{8}{12}\), and the number of periods is the time in months divided by 8.
Rate per period \(\displaystyle =12\%\times\frac{8}{12}=8\%\)
Number of periods in 2 years \(\displaystyle =\frac{24}{8}=3\)
Amount \(=25000\times1.08^{3}=25000\times1.259712=31492.80\)
Compound interest \(=31492.80-25000=6492.80\)
The compound interest is Rs 6492.80.