What is the interest payable on ₹12,000 for 3 months at the rate of 10% per annum, if interest is compounded quarterly?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. ₹300
The formula to calculate the compound interest is given by:
A = P(1 + r/n)(n × t)
Where,
A = Total amount including interest
P = Principal amount
r = Rate of interest per annum
n = Number of times interest is compounded per year
t = Time period in years
Here, P = ₹12,000, r = 10% per annum, n = 4 (since interest is compounded quarterly), and t = 3/12 years (since time is given in months).
Substituting these values in the formula, we get:
A = 12000(1 + 0.1/4)(4 × 3/12)
= 12000(1.025)1
= 12300.00 (rounded off to 2 decimal places)
So, the total amount including interest is ₹12,300.
The interest payable will be the difference between the total amount and the principal amount, which is:
Interest payable = Total amount - Principal amount
= ₹12,300 - ₹12,000
= ₹300