A sum of Rs. 250000 is invested for one and half years at 12% per annum compound interest. What is the difference between the amounts received when the interest is compounded semi - annually and when it is compounded annually?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Rs. 954
Given:
Principal = Rs 250000
Rate = 12% p.a.
Time = 1(1/2) years
Formula used:
A = P(1 + R/100)T ---- (1)
Calculations:
When compound interest is calculated half yearly
Time = 3 years, rate = 6%
Using equation (1), we get
⇒ A = 250000(1 + 6/100)3
⇒ A = 250000(53/50)3
⇒ A = 297754 ---- (2)
When compound interest is calculated annually
Amount at the end of 1.5 years
⇒ A = 296800 ---- (3)
Subtracting equation (3) from (2)
⇒ Required difference = 297754 - 296800 = 954