Multiple choice

Rs.200 was invested for one year in a scheme that offered a simple interest @ 10% p.a. Another Rs.200 was invested for one year in a scheme that offered @ 10% p.a., but compounded half-yearly. How much more will the interest accrued under the second scheme be?

  1. 25 paise

  2. 50 paise

  3. Rs.1

  4. No change
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest = Principal * Rate * Time = 200 * 10% * 1 = Rs.20. Compound interest (half-yearly) = 200 * (1 + 5%)² - 200 = 200 * 1.1025 - 200 = Rs.20.50. The difference is 20.50 - 20 = Rs.0.50 = 50 paise. Compounding half-yearly at 10% means 5% every 6 months.

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