Question

# Calculate the compound interest on ₹ 2000 over a period of 1 year at 20% per annum if the interest rate is compounded half yearly.

A
₹ 420
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B
₹ 400
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C
₹ 100
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D
₹ 300
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Solution

## The correct option is A ₹ 420Given Compound interest = ₹ 2000 Interest rate per annum (r) = 20% Now, interest rate for half year = 202 = 10 % Since, the interest is compounded half yearly, so there will be two conversion periods in the year. So, n = 2 By using formula for compound interest, we can write Amount=P[(1+r100)n] Amount=2000[(1+10100)2] Amount =₹ 2420 Now, Compound Interest = Amount - Principal Compound Interest = ₹ 2420 - ₹ 2000 Compound Interest = ₹ 420

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