Question
A financial institution gives compound interest at the rate
of 10% per annum, compounded half yearly. What is the interest earned after one year on a deposit of Rs. 40000?Solution
ATQ,
Effective rate of interest = 10 × (6/12) = 5%
Effective time or number of terms = 2 half-years
Amount received at compound interest = sum invested × {1 +
(rate/100)}^number of terms
Or, amount received = 40000 × {1 + (5/100)}^2
= 40000 × (105/100) × (105/100) = Rs. 44100
Therefore, interest earned = 44100 - 40000 = Rs. 4100
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