Compound Interest Practice Test 3

Question : 21 of 40

Marks: +1, -0

Money is lent at 12% compound interest, compounded half yearly. At what rate should it be given to get the equivalent of this if compounding is done annually?

12.5%
12.4%
12.36%
12.8%

Validate

Solution:

Let the principal = Rs 100 R = 12%
If compounded half yearly,

=100(1+6/100)^2

=100×106/100×106/100

= Rs 112.36
Now if it is compounded annually, then the rate of interest = 112.36

100(1+r/100)^1=112.36

112.36 = 100 + r

r = 12.36%

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