What is the difference between the compound interest on ₹3000 for one year at 5% per annum compounded yearly and that compound half-yearly?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. ₹1(7/8).
Formula used:
CI = P(1 + R/100)T where
P = principal, R = rate and T = time
Calculations:
Rate of interest when compounded yearly = 5%
Rate of interest when compounded half yearly = 2.5%
Effective rate of interest for 2 time period = 5.0625%
⇒ Difference = 3000(5.0625% - 5%)
⇒ 3000 × 0.0625/100
⇒ 1.875 = 1(7/8)