CMA Foundation · Fundamentals of Business Mathematics and Statistics · Time Value of Money and Annuity - Simple and Compound Interest
Rs 20,000 is invested at a nominal rate of 10% per annum compounded half-yearly. What is the amount at the end of 1 year?
The amount is Rs 22,050. The nominal 10% compounded half-yearly means 5% per half-year for two periods, so the amount is 20,000 multiplied by 1.05 squared, which is 1.1025, giving Rs 22,050 at the end of one year.
- ARs 22,000
- BRs 22,050Correct
- CRs 22,100
- DRs 22,500
Explanation
Half-yearly rate = 5%, periods = 2. Amount = 20,000 x (1.05)^2 = 20,000 x 1.1025 = Rs 22,050. Rs 22,000 ignores compounding within the year.
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