Question

Arif took a loan of Rs 80,000 from a bank. If the rate of interest is 10% per annum, find the difference in amounts he would be paying after 1.5 years if the interest is

(i) compounded annually.

(ii) compounded half yearly.

Answer 1

(i) compounded annually.

Solution: Amount after 1 year =80000+80000 10%=80000+8000=88000
Interest for the next 6 months = 88000 x 5%=4400
Amount after 1.5 years = 88000+4400 = 92400

(ii) compounded half yearly.

Solution: rate of interest will become half and time will be three half years.