Question

Find the interest earned in the first year on ₹ 200 at 20% p.a. compound interest, interest compounded every three months.
1. ₹ 44.101
2. ₹ 43.101
3. ₹ 44.701
4. ₹ 41.101

Answer 1

Correct Answer - Option 2 : ₹ 43.101

CALCULATION:

As the rate is 20% p.a., so 3-month interest would be 5%.

∵ Interest is compounded every three months so for 1 year time period will be 1 year/3 month = 4

Amount = 200 × (1 + 5/100)⁴ = 200 × 1.05⁴ = 200 × 1.2155 = 243.101

Interest = 243.101 – 200 = ₹ 43.101