Rs. 20000 is lent at compound interest at an annual rate of 16 percent for 1 year. If the compounding of interest is done half yearly, then how much interest will be obtained?
Answer & explanation
Correct answer: option 4
Amount = P(1 + \(\frac{ r/2 }{100}\) )2t
= 20000 (1 + \(\frac{ 16 }{200}\) )2*1
= 20000 (\(\frac{ 108 }{100}\))2
= 20000 * \(\frac{ 27 }{25}\) * \(\frac{ 27 }{25}\)
= 23328
CI = Amount – Principal = Rs.23328 – 20000 = Rs.3328