Multiple choice

What is the difference between amounts earned by Kanika, if the interest is compounded annually and if it is compounded half yearly. Given the amount invested is Rs. 2,00,000 for 1 year at 8%?

  1. Rs. 160

  2. Rs. 320

  3. Rs. 480

  4. Rs. 640

  5. Na
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest (compounded annually) = 200,000 * 0.08 = 16,000. Half-yearly compounding: 200,000 * (1 + 0.04)^2 - 200,000 = 200,000 * 1.0816 - 200,000 = 16,320. Difference = 320.

AI explanation

For annual compounding, the amount is 200000 times 1.08 which equals 216000. For half yearly compounding, the effective rate becomes 4% per half year for two periods, making the amount 200000 times 1.04 squared, which is 216640. The difference between the two amounts is 216640 minus 216000, which equals 320.

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