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What is the difference between compound interest on Rs. 5,000 for 1 1\2% years at 4% per annum the interest is compounded yearly and half-yearly ?
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Explanation:
Principal(p) =Rs.5,000
t= 1 1\2=3\2years
Rate %= 4 %=1\25
Case 1: When interest is compounded annually
2nd year CI = (200+8)= RS. 208
6 months CI in 2nd year
208\12×6 = RS. 104
Total interest
= Rs (200+104) = Rs. 304
Case 2: When interest is compounded half yearly
Rate %=4\2= 2 %
Time = = 3\2×2=3years
Total compound interest
= (100×3+6+0.04)
= Rs. (300+6.04)
= Rs. 306.04
Difference = Rs.(306.04−304) = Rs. 2.04