Question

Find the amount on ₹ 4000 at 20% p.a. compounded half yearly for 1 year.

Options

• ₹ 5600

• ₹ 5760

• ₹ 4800

• ₹ 4840

Answer 1

₹ 4840

Explanation:

Step 1: Understand half-yearly compounding

If interest is compounded half-yearly, then:

• The rate per half-year = `(20%)/2` = 10%
• The number of periods = 2 half-years in 1 year

The formula for compound interest:

`A = P(1 + r/100)^n`

Where:

• P = 4000
• r = 10% per half-year
• n = 2 half-years

Step 2: Substitute the values

`A = 4000(1 + 10/100)^2`

`A = 4000 xx (1.1)^2`

Step 3: Calculate (1.1)²

1.1 × 1.1 = 1.21

A = 4000 × 1.21

A = 4840