Question

What amount is to be repaid on a loan of Rs. 12000 for $1\frac{1}{2}$ year at 10% per annum if interest is compounded half yearly.

Answer 1

As interest is compounded half yearly, so number of conversion periods in $1\frac{1}{2}$ years is $3$, So $n=3$
rate for half year $=\frac{1}{2}\times 10\%=5\%$
$A=P{(1+\frac{R}{100})}^n$
$A=12000{(1+\frac{5}{100})}^3$
$=12000{\left(\frac{105}{100}\right)}^3$
$=Rs.13891.50$
Compound interest $=A-P$
$=13891.50-12000$
$=Rs.1891.50$