Question

Find the number of conversion times the interest is compounded and rate for each.

i) A sum taken for 1 1/2 years at 8% per annum is compounded half yearly.

ii) A sum taken for 2 years at 4% per annum is compounded half yearly. 

Answer 1

Compound interest will be calculated for every 6 months. 

There will be 3 periods in 1 1/2 year. 

∴ n = 3 

∴ Rate of interest for half yearly = 1/2 × 8% = 4% 

∴ R = 4%; n = 3 

ii) C.I. should be calculated for every 6 months. 

There will be 4 time periods in 2 years.

∴ n = 4 

∴ Rate of interest for half yearly = 1/2 × 4% = 2% 

∴ n = 4 ; R = 2%