What will be the difference in compound interest on a sum of Rs. 7,800 at 8% for 1 year, when the interest is paid yearly and half yearly ?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e Rs.12.48
Explanation:
Principal(p) = 7800
Rate of interest(r) = 8%
time(t) = 1 year
Interest when paid yearly = p(1 + r/100)t - p = 7800 × (1 + 8/100) - 7800
= 7800 × 108/100 - 7800 = 8424 - 7800 = 624
Interest when paid yearly,
t = 1 × 2 = 2
r = 8/2 = 4%
Interest = 7800 × (1 + 4/100)2 - 7800 = 7800 × (104/100) × (104/100) - 7800 = 8436.48 -
7800 = 636.48
Difference = 636.48 - 624 = Rs.12.48