Question

Calculate Compound interest on Rs. 1000 over a period of 1 year at 10% per annum if interest is compounded half yearly.

Answer 1

As interest is compounded half yearly, so there will be 2 conversion periods in a year.
So, $n=2$
Rate of interest for 6 months rate $=\frac{1}{2}\times 10\%=5\%$
$A=P{(1+\frac{R}{100})}^n$
$A=1000{(1+\frac{5}{100})}^2$
$=1000{\left(\frac{105}{100}\right)}^2$
$=Rs.1102.50$
Compound interest $=A-P=1102.50-1000=Rs.102.50$