Rs. 9000 is lent at the rate of 80 percent per annum on compound interest (compounded half-yearly.) What will be the compound interest of 12 months?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Rs. 8640.
the principal (P) = 9000
the annual interest rate (r) = 80% = 0.80
n is the number of times the interest is compounded per year (since it's compounded half-yearly, n = 2)
T = 12 months or 1 year
the compound interest:
A = (P(1 + r/n)nt) - P
⇒ A = (9000 (1 + 0.8/2)2 ×1)
⇒ A = (9000(1 + 0.40)2 )
⇒ A = (9000 (1.40)2 )
⇒ A = (9000 × 1.96)
⇒ A = 17640
Compound Interest = A − P = 17640 − 9000 = 8640