Question 75
On a certain principal, simple interest amounts to Rs. 1,000 in 1 year at the rate of 10% p.a. What will be the effective rate of interest if the same is compounded on half yearly basis?
Solution
R = 10% and R = 5% for half year
Net effective rate in compound interest = $$x+y+\frac{x\times\ y}{100}$$
$$5+5+\frac{5\times\ 5}{100}=10.25$$ %.
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