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An amount of Rs 200 was invested in a one-year plan, in which 10% annual simple interest was offered, compounded annually in interest. Another amount of Rs 200 was iinvested in a one-year plan at 10% per annum, but interest was compounded half-yearly. How much more will be the interest earned under the second plan?
1. 10 paisa
2. 25 paisa
3. 1 paisa
4. 50 paisa

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Correct Answer - Option 4 : 50 paisa

Given:

Principal = Rs. 200

Rate = 10%

Formula used:

Simple Interest = (Principal × Rate × Time)/100

Compound Interest = Principal[(1 + rate/100)time - 1]

Calculation:

Simple Interest in 1 year

⇒ (200 × 10 × 1)/100

⇒ 20

Compound Interest compound half yearly

rate = 10/2 = 5%, time = 2

⇒ 200[(1 + 5/100)2 - ]

⇒ 20.5

Difference of interest

⇒ 20.5 - 20

⇒ 0.5

∴ The difference of interest is 0.50 paisa.

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