Correct Answer - Option 1 : Rs 6.25

**Given:**

Principal = Rs 2500

Rate = 10% per annum

Time = 1 Year

**Formula Used:**

\({\rm{A}} = P{\left[ {1 + \frac{r}{{100}}} \right]^n}\)

Compound interest = Amount - Principal

**Concept Used:**

If Rate is compounded half yearly, then we half the rate given

If it is compounded half yearly then we have two terms of 6 months so we take n as 2

**Calculation:**

For the rate to be compounded annually,

Amount = \({\rm{A}} = 2500{\left[ {1 + \frac{{10}}{{100}}} \right]^1}\)

⇒ A = (2500 × 11)/10

⇒ A = Rs 2750

Compound interest = 2750 - 2500 = Rs 250

For the interest to be compounded half yearly,

Amount = \({\rm{A}} = 2500{\left[ {1 + \frac{5}{{100}}} \right]^2}\)

⇒ A = (2500 × 21 × 21)/(20 × 20) = Rs 2756.25

Compound Interest = 2756.25 - 2500 = Rs 256.25

Difference between two compound interest = 256.25 - 250 = Rs 6.25

**∴ The difference between the interest earned in both the cases will be Rs 6.25**