Question

A bank offers 5% compound interest calculated on half yearly basis. A customer deposits Rs.1600 each on 1st july of a year. At the end of the year,the amount he would have gained by the way of interest is:​

Answer 1

Answer: Rs. 40

Explanation:

The interest is compounded on a semi-annual basis which means that you need to convert the interest rate to a periodic interest rate:

= 5% / 2

= 2.5%

The interest gained in those six months will be:

= 1,600 * 2.5%

= Rs. 40