Multiple choice

A bank offers 10% interest per annum and interest is compounded half yearly. A customer deposits Rs. 2,000 each on 1st January and 1st July of an year. At the end of the year, the amount he would have gained by way of interest is

  1. Rs. 240

  2. Rs. 310

  3. Rs. 305

  4. Rs. 300
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

First 2000 deposited Jan 1 earns interest for 12 months (2 halves) at 5% per half year: 2000 * (1.05)^2 - 2000 = 2000 * 1.1025 - 2000 = 205. Second 2000 deposited July 1 earns interest for 6 months (1 half) at 5%: 2000 * 1.05 - 2000 = 100. Total interest = 205 + 100 = 305.

AI explanation

The first deposit of Rs. 2,000 earns 5% interest for two half-year periods, yielding 2000 * (1.05)^2 = 2,205. The second deposit of Rs. 2,000 earns 5% interest for one half-year period, yielding 2000 * 1.05 = 2,100. The total amount is 4,305, and subtracting the total principal of 4,000 gives an interest of Rs. 305.

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