Multiple choice

Amit invested two equal sums of Rs. 5000 for 2 years at 10%, one at compound interest payable yearly and the other at compound interest payable half-yearly. Find the difference between amounts that he will get at the end of 2 years.

  1. Rs. 23.50

  2. Rs. 24.50

  3. Rs. 25.50

  4. Rs. 27.50
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

For yearly compounding, A = 5000(1 + 0.10)^2 = 6050. For half-yearly compounding, A = 5000(1 + 0.05)^4 = 5000(1.21550625) = 6077.53. The difference is 6077.53 - 6050 = 27.53, which is closest to 27.50.

AI explanation

Using the compound interest formula, the amount for yearly compounding is 5000 multiplied by 1.10 squared, which equals 6050. For half-yearly compounding, the rate is halved to 5 percent and the time is doubled to 4 periods, making the amount 5000 multiplied by 1.05 to the power of 4, which equals 6077.50. The difference between these two amounts is 6077.50 minus 6050, giving a result of Rs. 27.50.

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