Question

Lathika deposited 25,000 rupees in a bank which gives 8% interest compounded half-yearly. Najma deposited the same amount at the same rate of interest, but compounded quarterly. What is the difference in the amounts they would get back after one year?

Answer 1

Amount deposited, P = Rs.25000

Rate of interest = 8% compounded half-yearly

Time, T = 1 year

For Lathika:

Simple interest is given by the formula

Interest for the first half of the first year = Rs

= Rs.1000

Principal for the second half of the first year = Principal + Interest

= Rs.25000 + Rs.1000

= Rs.26000

Interest for the second half of the first year = Rs

_{= Rs.1040}

Amount received by Lathika after one year = Rs.26000 + Rs.1040

= Rs.27040

For Najma:

Interest for the first quarter = Rs

= Rs.500

Principal for the second quarter = Principal + Interest

= Rs.25000 + Rs.500

= Rs.25500

Interest for the second quarter = Rs

= Rs.510

Principal for the third quarter = Rs.25500 + Rs.510

= Rs.26010

Interest for the third quarter = Rs

= Rs.520.20

Principal for the fourth quarter = Rs.26010 + Rs.520.20

= Rs.26530.20

Interest for the fourth quarter = Rs

= Rs.530.60

Amount Lathika get back after one year = Rs.26530.20 + Rs.530.60

= Rs.27060.80

Difference between their amounts = Rs.27060.80 − Rs.27040

= Rs.20.80