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Question

Ankush puts Rs. 8,000 into two separate Systematic Investment Plans (SIPs) at a compound interest rate of 20% per annum. In SIP 'X', the investment is for 2 years with annual compounding, while in SIP 'Y', the investment period is 18 months with semi-annual compounding. Calculate the difference in interest generated by the two SIPs.

A Rs.950 Correct Answer Incorrect Answer
B Rs.820 Correct Answer Incorrect Answer
C Rs.772 Correct Answer Incorrect Answer
D Rs.872 Correct Answer Incorrect Answer
E none of these Correct Answer Incorrect Answer

Solution

ATQ, Compound interest = Sum × {1 + (rate of interest/100) }time period - Sum For SIP 'X': Interest earned = 8000 × {1 + (20/100) }2- 8000 = 8000 × (1.2)2 - 8000 = 8000 × (1.44 - 1) = Rs.3,520 For SIP 'Y': Effective rate of interest = 20 ÷ 2 = 10% per term Effective time period = (18/12) × 2 = 3 terms So, interest earned = 8000 × {1 + (10/100) }3 - 8000 = 8000 × (1.1)3- 8000 = 8000 × (1.331 - 1) = Rs. 2,648 So, required difference = 3520 - 2648 = Rs. 872

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