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What is the difference between the compound interest on Rs.12000 at 20% p.a. for one year when compounded yearly and half yearly?

Correct answer: B. Rs.120

  • A. Rs.140
  • B. Rs.120
  • C. Rs.130
  • D. Rs.110
  • E. None of these.Enrolling In Online Certification Courses

Explanation

With yearly compounding, the one-year interest is Rs. 12,000 x 20% = Rs. 2,400. With half-yearly compounding, the rate is 10% per half-year, giving interest Rs. 12,000 x [(1.10)^2 - 1] = Rs. 2,520, and the difference is Rs. 2,520 - Rs. 2,400 = Rs. 120. Option a, Rs. 140, results from an arithmetic error in the half-yearly calculation.

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