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Question
What will be the compound interest on a sum of Rs 25000 for 2 years at 12% pa if the interest is compounded 8 monthly?
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Answer
Months in 2 years = 24
Number of times interest is compounded = 24/8 = 3
P = 25000
T= 2 years
R = 12% or 0.12
N = 3, interest compounded 3 times in the time period
A = P( 1+ R/N) ^ T
A = 25000( 1+ 0.12/3) ^ 2
= 25000 * (1.04)^2
= 25000 * 1.0816
= 27040
Interest = A-P
= 27040 - 25000
= 2040
