Question : What is the difference between the compound interest on INR 6,400 for 1 year at 5% per annum compounded yearly and half-yearly?
Option 1: INR 8
Option 2: INR 9
Option 3: INR 4
Option 4: INR 7
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Correct Answer: INR 4
Solution :
Here, interest for annually counts as simple interest and if the interest rate is half-yearly, then the rate counts as $\frac{5}{2}$ = 2.5% compounded.
Required difference = $6400\times (\frac{r}{100})^2$
= $6400\times (\frac{2.5}{100})^2$
= INR 4
Hence, the correct answer is INR 4.
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