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An amount of 5,000 is invested at a fixed rate of 8 per cent per annum. What amount will be the value of the investment in five years time, if the interest is compounded every six months?

Correct answer: A. 7401.22

  • A. 7401.22
  • B. 3456
  • C. 4567
  • D. 7890Primary & Secondary Schooling (K-12)

Explanation

Compounding every 6 months means 2 compounding periods per year, so the rate per period is 8% ÷ 2 = 4% and there are 5 years x 2 = 10 periods. The final amount is Rs. 5000 x (1.04)^10 = Rs. 7401.22. Option b, 3456, does not apply compound growth to all 10 half-year periods.

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