Compound Interest

Question: What is the difference between the compound interests on Rs. 5000 for 1 years at 4% per annum compounded yearly and half-yearly?

[A].

Rs. 2.04

[B].

Rs. 3.06

[C].

Rs. 4.80

[D].

Rs. 8.30

Answer: Option A

Explanation:

C.I. when interest compounded yearly	= Rs. 5000 x 1 + 4 x 1 + x 4 100 100
	= Rs. 5000 x 26 x 51 25 50
	= Rs. 5304.

C.I. when interest is compounded half-yearly	= Rs. 5000 x 1 + 2 3 100
	= Rs. 5000 x 51 x 51 x 51 50 50 50
	= Rs. 5306.04

Difference = Rs. (5306.04 – 5304) = Rs. 2.04

Question: A bank offers 5% compound interest calculated on half-yearly basis. A customer deposits Rs. 1600 each on 1st January and 1st July of a year. At the end of the year, the amount he would have gained by way of interest is:

[A].

Rs. 120

[B].

Rs. 121

[C].

Rs. 122

[D].

Rs. 123

Answer: Option B

Explanation:

Amount	= Rs. 1600 x 1 + 5 2 + 1600 x 1 + 5 2 x 100 2 x 100
	= Rs. 1600 x 41 x 41 + 1600 x 41 40 40 40
	= Rs. 1600 x 41 41 + 1 40 40
	= Rs. 1600 x 41 x 81 40 x 40
	= Rs. 3321.

C.I. = Rs. (3321 – 3200) = Rs. 121

Question:
What will be the compound interest on a sum of Rs. 25,000 after 3 years at the rate of 12 p.c.p.a.?

[A].

Rs. 9000.30

[B].

Rs. 9720

[C].

Rs. 10123.20

[D].

Rs. 10483.20

Answer: Option C

Explanation:

Amount	= Rs. 25000 x 1 + 12 3 100
	= Rs. 25000 x 28 x 28 x 28 25 25 25
	= Rs. 35123.20

C.I. = Rs. (35123.20 – 25000) = Rs. 10123.20

Question: Albert invested an amount of Rs. 8000 in a fixed deposit scheme for 2 years at compound interest rate 5 p.c.p.a. How much amount will Albert get on maturity of the fixed deposit?

[A].

Rs. 8600

[B].

Rs. 8620

[C].

Rs. 8820

[D].

None of these

Answer: Option C

Explanation:

Amount	= Rs. 8000 x 1 + 5 2 100
	= Rs. 8000 x 21 x 21 20 20
	= Rs. 8820.