Question

Raghav borrowed a sum of $Rs4000$ to be paid back in $1\frac{1}{2}$ years at $10\%p.a.$ compound interest, interest being payable half-yearly. How much extra amount will Raghav have to pay back?

Answer 1

Given Rate of interest is $r=10\%=0.1$

Principal Amount is $A=4,000$

Time is $t=1\frac{1}{2}=\frac{3}{2}$ years

Interest is compounded yearly twice $⟹n=2$

Amount $=P(1+\frac{r}{n}{)}^{nt}=4000\times (1+\frac{0.1}{2}{)}^3=4630.5$

Interest is $A-P=4,630.5-4,000=630.5$

Therefore, Raghav will have to pay $Rs.630.5$ extra.