Question

Calculate the difference in compound interest when interest is calculated yearly and half yearly on sum of $Rs50,000$ for one year at $25\%$ per annum.

Answer 1

Yearly:-

$A_1=P(1+r{)}^t=50000{(1+\frac{25}{100})}^1=\frac{50000\times 125}{100}$

$=62500$ Rs.

Half yearly:

$A_2=P{(1+\frac{r}{2})}^{2t}=50000{(1+\frac{25}{200})}^2=63281.25Rs$

$A_2-A_1=(P+C_2)-(P+C_1)=P+C_2-P-C_1$

$=C_2-C_1=63281.25-62500$

$=781.25$ Rs.