Question

Rakesh lent out Rs$10000$ for $2$ years at $20\%$ per annum, compounded annually. How much more he could earn if the interest be compounded half-yearly?

Answer 1

$P=$ Rs $10000$

$R=20\%$ p.a

$n=2$ years

$A=P{(1+\frac{R}{100})}^n$

$A=10000{(1+\frac{20}{100})}^2$

$A=10000{\left(1.2\right)}^2$

$A=14400$

When the interest is compounded half-yearly,

We have:

$A=P{(1+\frac{R}{200})}^{2n}$

$A=10000{(1+\frac{20}{200})}^4$

$A=10000{\left(1.1\right)}^4$

$A=$ Rs $14641$

Difference $=$ Rs $14641–$ Rs $14400=$ Rs $241$