Multiple choice

A bank offers 10% compound interest per four months. A customer deposits Rs 5000 each on 1st January, on 1st April and on 1st August of a year. At the end of the year, find the amount he would have gained by means of interest?

  1. Rs.1050

  2. Rs.3205

  3. Rs.5000

  4. Rs.2500

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

10% interest per 4 months means quarterly compounding at 10%. Jan deposit: compounds 3 times (Apr, Aug, Dec). Apr deposit: compounds 2 times (Aug, Dec). Aug deposit: compounds 1 time (Dec). Interest = 5000×1.1³ + 5000×1.1² + 5000×1.1 - 15000. This equals 5000×(1.331 + 1.21 + 1.1) - 15000 = 5000×3.641 - 15000 = 18205 - 15000 = Rs.3205.

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