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Asked in a 2000 paper

A money lender lends Rs.2000 for six months at 20% p.a. rate. It the interest is reckoned quarterly than find the amount given after time limit.

Correct answer: A. Rs.2205

  • A. Rs.2205
  • B. Rs.2200
  • C. Rs.2160
  • D. Rs.2040

Explanation

For quarterly compounding, the 20% annual rate becomes 20%/4 = 5% per quarter, and 6 months contains 2 quarters. Amount = Rs.2000 x 1.05² = Rs.2000 x 1.1025 = Rs.2205. Students may choose Rs.2200 by applying simple interest or using only 20% for the six-month period.

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