CA Foundation · Quantitative Aptitude · Mathematics of Finance
Ms. Kavita deposits ₹20,000 for 1 year at 6% per annum compounded quarterly. Under the same effective rate, how much interest does she earn in the year?
She earns about ₹1,227. The quarterly rate is 1.5%, so the amount after one year is 20,000 x (1.015)^4, about ₹21,227. Subtracting the principal gives interest of ₹1,227, which is more than the ₹1,200 simple interest.
- A₹1,227Correct
- B₹1,200
- C₹1,214
- D₹1,350
Explanation
Quarterly rate = 1.5%. Amount = 20,000 x (1.015)^4 = 20,000 x 1.061364 = 21,227.27. Interest is about ₹1,227. The ₹1,200 option is simple interest and ignores compounding.
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