Multiple choice

A certain sum, invested with interest at 8% per annum, compounded semi-annually amounts to Rs. 6760 at the end of 1 year. The sum is -

  1. Rs. 6000

  2. Rs. 6520

  3. Rs. 6250

  4. Rs. 6500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For semi-annual compounding at 8% per annum, the rate per half-year is 4%. In 1 year, there are 2 half-year periods. Using A = P(1 + r)^n, we get 6760 = P(1.04)^2 = P(1.0816). Therefore, P = 6760/1.0816 = Rs. 6250. Answer C is correct.

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