Question

A sum of Rs. 50,000 is invested in a bank deposit for 1 year at an interest rate of 10% per annum, compounded on a half - yearly basis. What is the amount of interest at the end of 1 year?
1. 5125
2. 5250
3. 5500
4. 5150

Answer 1

Correct Answer - Option 1 : 5125

Given:

Principal, p = Rs. 50,000

Time = 1 years

Compounded half yearly, n = 2

Rate, r = 10/2 = 5%

Formula used:

Amount = Principal × [1 + r/100]ⁿ 

Amount = Principal + Interest

Calculation:

Amount = 50,000 × [1 + 5/100]²

⇒ Amount = 50000 × 21/20 × 21/20 

⇒ Amount = 125 × 21 × 21

⇒ Amount = Rs. 55,125

Amount = Principal + Interest

⇒ 55,125 = 50,000 + Interest

⇒ Amount of interest = Rs. 5,125

∴ The amount of interest is Rs. 5,125.