What is the difference between simple interest and compound interest on Rs. 10,000 for two years at 20% per annum compounded half-yearly ?
- AOption (a)
Rs. 842
- BOption (b)
Rs. 756
- COption (c)
Rs. 641
- DOption (d)
Rs. 542
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Correct answer
Rs. 641
Why this answer is correct
Formula used:
When interest is compounded half-yearly
Time = 2 × original time
Rate = (1/2) × original rate.
Calculation:
Rate = 20/2 = 10%
Time = 2 × 2 = 4 half-year
| P = 10000/- | ||||
|---|---|---|---|---|
| 1st half-year | 1000 | |||
| 2nd half-year | 1000 | 100 | ||
| 3rd half-year | 1000 | 200 | 10 | |
| 4th half-year | 1000 | 300 | 30 | 1 |
S.I = 1000 + 1000 + 1000 + 1000 = 4000
C.I = 4000 + 600 + 40 + 1 = 4641
∴ C.I - S.I = 4641 - 4000 = 641