Find the compound interest on Rs. 16000 for 9 months at 20% p.a. compounded quarterly:__________?
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Answer: C. Rs 2522
Explanation
Compounding quarterly for nine months means there are three distinct interest periods at five percent per quarter. Multiplying the principal by one point zero five raised to the third power gives the total accumulated amount. Subtracting the initial principal of sixteen thousand from the final amount leaves a compound interest of twenty five twenty two. Compound interest calculates earnings on both the initial principal and accumulated interest over time. Quarterly compounding divides the annual interest rate by four and multiplies the years by four. Exponential growth formulas determine the future value of investments earning compound interest.
Commercial banks apply quarterly compounding methods for various business loans and savings certificates. Financial analysts calculate multiperiod returns to evaluate the growth of corporate investments. Personal finance planning requires understanding compound interest to project retirement savings growth. Option A underestimates the interest by using an incorrect compounding period multiplier. Option B represents a close approximation but fails to match the exact exponential calculation. Option D overestimates the accrued interest due to an error in the compounding exponent.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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