A bank offers 5% compound interest calculated on half-yearly basis. A customer deposits Rs. 1600 each on 1st January and 1st July of a year. At the end of the year, the amount he would have gained by way of interest is:
B
Correct answer
Explanation
For half-yearly compounding at 5% annual rate: Each half-year earns 2.5% interest. First deposit (Jan 1): 1600 for 2 half-years = 1600 × 1.025² = 1681. Second deposit (July 1): 1600 for 1 half-year = 1600 × 1.025 = 1640. Total = 1681 + 1640 = 3321. Interest gained = 3321 - 3200 = 121. Therefore, option B is correct.