A sum of Rs. 10,000 is invested at a nominal rate of 10% per annum compounded semiannually. What is its value after 3 years?
Correct answer: A. Rs. 13,400.96
- A. Rs. 13,400.96
- B. Rs. 13,500.00
- C. Rs. 13,310.00
- D. Rs. 13,600.00
Explanation
The semiannual rate is 5% and there are six compounding periods. Thus, the value is Rs. 10,000(1.05)^6 = Rs. 13,400.96. Using 10% directly for each half-year would overstate the amount.
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