What is the compound interest on ₹20,000 for 9 months at the rate of 4% per annum, when interest is compounded quarterly?
Answer & explanation
Correct answer: option 2
Interest is compounded quarterly,
Actual rate of interest = \(\frac{4}{4}\)% = 1%
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 20000 [ 1 + \(\frac{1}{100}\) ]³ - 20000
= 20000 [ \(\frac{101}{100}\) ]³ - 20000
= 20000 [ \(\frac{101}{100}\) × \(\frac{101}{100}\) × \(\frac{101}{100}\) - 1 ]
= 20000 [ \(\frac{ 1030301}{1000000}\) - 1 ]
= 20000 [ \(\frac{ 30301}{1000000}\) ]
= Rs. 606.02