CS Executive · Corporate Accounting and Financial Management · Time Value of Money
A sum of ₹20,000 is invested at 12% per annum compounded half-yearly for 1 year. What is the maturity amount?
The maturity amount is ₹22,472. With half-yearly compounding, the rate is 6% per period for 2 periods, so 20,000 × (1.06)² = 20,000 × 1.1236 = ₹22,472, which exceeds the simple interest amount of ₹22,400.
- A₹22,400
- B₹22,472Correct
- C₹22,500
- D₹22,248
Explanation
Half-yearly rate = 6% for 2 periods. Amount = 20,000 × 1.06² = 20,000 × 1.1236 = ₹22,472. ₹22,400 results from simple interest, and ₹22,400 ignores intra-year compounding. ₹22,248 uses 3% quarterly wrongly applied for 2 periods.
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