Time period for compound interest

CMAT 2018 · Quantitative Techniques & Data Interpretation · Medium · Compound Interest

In what time will Rs. 6,250 amount to Rs. 6,632.55 at 4% compound interest payable half-yearly?

  1. A.

    1 year

  2. B.

    32\frac{3}{2} years

  3. C.

    3 years

  4. D.

    52\frac{5}{2} years

Answer

B

Explanation

For half-yearly compounding, interest rate r=42=2%r = \frac{4}{2} = 2\%.

A=P(1+r100)nA = P\left(1 + \frac{r}{100}\right)^n 6632.55=6250(1.02)n6632.55 = 6250 (1.02)^n 1.061208=(1.02)n1.061208 = (1.02)^n

Since 1.023=1.0612081.02^3 = 1.061208, n=3n = 3 half-years = 1.5=321.5 = \frac{3}{2} years.

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