
Shortcut Trick
For half-yearly compounding, Rate = 10% ÷ 2 = 5% and Time = 2 × 2 = 4 periods.
Effective rate for 4 periods at 5% = 21.550625%.
Compound Interest = 5000 × 21.550625% = 1077.53125.
Rounding to two decimal places, we get ₹1077.50.
∴ The correct answer is Rs. 1,077.50.

Alternate Method
Given: Principal (P) = ₹5,000, Rate (R) = 10% p.a., Time (n) = 2 years.
Formula Used: Amount (A) = P(1 + r/100)t; CI = A − P.

⇒ Since interest is compounded half-yearly:
⇒ New Rate (r) = 10% ÷ 2 = 5% per half-year.
⇒ New Time (t) = 2 × 2 = 4 half-years.
⇒ A = 5000 × (1 + 5/100)4
⇒ A = 5000 × (21/20)4
⇒ A = 5000 × (194481 / 160000)
⇒ A = 5000 × 1.21550625 = 6077.53125
⇒ CI = 6077.53125 − 5000 = 1077.53125
∴ The correct answer is Rs. 1,077.50.

Additional Information
Half-Yearly Compounding Rule
When interest is compounded half-yearly, the annual rate is halved (R/2) and the time period is doubled (2n).
Quarterly Compounding Rule
When interest is compounded quarterly, the annual rate is divided by 4 (R/4) and the time period is multiplied by 4 (4n).
Effective Rate Formula
For two successive cycles of r%, the effective rate is (r + r + r2/100)%.