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What is the difference between the C.I. on Rs. 5000 for 1 1/2 years at 4% per annum compounded yearly and half-yearly?

Correct answer: A. Rs. 2.04

  • A. Rs. 2.04
  • B. Rs. 3.06
  • C. Rs. 4.80
  • D. Rs. 8.30

Explanation

For yearly compounding over 1.5 years, the amount is Rs. 5000 x 1.04 plus half-year simple interest on Rs. 5200, giving Rs. 5200 + Rs. 104 = Rs. 5304 and CI of Rs. 304. For half-yearly compounding, the amount is Rs. 5000(1.02)^3 = Rs. 5306.04, so the difference in interest is Rs. 306.04 - Rs. 304 = Rs. 2.04. The likely mistake is choosing option b, Rs. 3.06, by using the wrong number of compounding periods.

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