Question
Amit charges interest on his lending at 20% Compound
Interest per annum compounding done half yearly. Principal is how much % less than the amount obtained at the end of 2 years?Solution
ATQ, Let P be the principal amount lent by Amit. After 2 years, the amount obtained at the end of the period will be: A = P x (1 + r/100) n where r is the annual interest rate (20%), n is the number of compounding periods in 2 years (4, since compounding is done half-yearly), and A is the amount obtained. So, we have: A = P x (1 + 20/100)4 A = 1.6384P Now, let's find the amount of interest earned: I = A - P I = 1.6384P - P I = 0.6384P So, the principal is 63.84% less than the amount obtained at the end of 2 years.
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