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    Rs. 20000 is lent at compound interest at an annual rate of 18 percent for 1 year (compounding annually). If the compounding of interest is done half
    Question

    Rs. 20000 is lent at compound interest at an annual rate of 18 percent for 1 year (compounding annually). If the compounding of interest is done half yearly, then how much more interest will be obtained?

    A.

    Rs. 190

    B.

    Rs. 142

    C.

    Rs. 162

    D.

    Rs. 150

    Correct option is C

    Given:
    Principal (P) = Rs. 20,000
    Annual Interest Rate (r) = 18
    Time (t) = 1 year
    Compounding Frequency: Half-yearly
    Concept Used:
    When compound interest is compounded more frequently than annually, the effective rate changes according to the frequency.
    For half-yearly compounding, the annual rate is divided by 2, and the time period is doubled.
    Formula Used:
    The formula for compound interest is:
    A=P(1+r100)nA=P(1+\frac{r}{100})^n
    Solution:
    Calculate interest with annual compounding (once per year):
    A=2000(1+18100)1 =2000×1.18 =23600 Intrest annual=2360020000=3600 Calculate interest with half-yearly compounding (twice per year): A=2000(1+9100)2 2000×(1.09)2=2000×(1.1881)=23762 Intrest half yearly=237622000=3762A=2000(1+\frac{18}{100})^1\\ \ \\ =2000\times1.18\\ \ \\ =23600 \\ \ \\ \text{Intrest annual} = 23600 - 20000=3600\\ \ \\ \text{Calculate interest with half-yearly compounding (twice per year):}\\ \ \\A= 2000(1+\frac{9}{100})^2\\ \ \\ 2000\times(1.09)^2= 2000\times(1.1881)= 23762 \\ \ \\ \text{Intrest half yearly}= 23762-2000= 3762​​
    Additional Intrest= 3762-3600 = 162 Rs.

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