What is the difference between the compound interests on Rs. 5000 for 1½ years at 4% per annum compounded yearly and half-yearly?

Correct Answer: Rs. 2.04

Explanation:

C.I. when interest
compounded yearly

= Rs.

[

5000 x

❨

1 +

4

❩

x

❨

1 +

½ x 4

❩

]

100

= Rs.	❨	5000 x	26	x	51	❩
			25		50

= Rs. 5304.

C.I. when interest is
compounded half-yearly

= Rs.	[	5000 x	❨	1 +	2	❩	3	]
					100

= Rs.	❨	5000 x	51	x	51	x	51	❩
			50		50		50

= Rs. 5306.04

∴ Difference = Rs. (5306.04 - 5304) = Rs. 2.04

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