Multiple choice

What will be the compound interest (nearest to Rs. 1) on a sum of Rs. 25,000 for 2 years at 12% p.a., if the interest is compounded 8-monthly?

  1. Rs. 6,394

  2. Rs. 6,439

  3. Rs. 6,493

  4. Rs. 6,349
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C Correct answer
AI explanation

When interest is compounded 8-monthly, the annual rate of 12% is adjusted to an effective rate of 8% for an 8-month period, making 3 such periods in 2 years. Using the compound amount formula, the total amount is 25000 * (1 + 8/100)^3 = 25000 * 1.259712 = 31492.8. Subtracting the original principal of 25000 gives a compound interest of Rs. 6493.

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