What is the compound interest on ₹20,000 for 9 months at the rate of 4% per annum, when interest is compounded quarterly?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. ₹606.02
Formula used:
CI = P(1 + R/100)T - P
Where, CI = compound interest, P = principal, R = rate and T = time
Calculations:
Rate when compounded quaterly = R/4 = 4/4 = 1%
Time = 9 months or 3 years cycle
Using above equation;
⇒ CI = 20000(1 + 1/100)T - 20000
⇒ CI = 20606.02 - 20000
⇒ CI = 606.02