What is the compound interest on ₹5000 in 2 years at the rate of 20% per annum? (interest compounded half yearly)
Answer & explanation
Correct answer: option 4
Interest is compounded half yearly
So, Actual rate of interest = \(\frac{20}{2}\)% = 10%
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 1000[ \(\frac{11}{10}\) × \(\frac{11}{10}\)× \(\frac{11}{10}\)× \(\frac{11}{10}\) - 1 ]
= 5000[ \(\frac{14641}{10000}\) - 1 ]
= 5000[ \(\frac{4641}{10000}\) ]
= Rs. 2320.50