What is the variance between compound interest on Rs.12000 at 20% annual rate for one year when compounded annually versus semi-annually?
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Answer: B. Rs.120
Explanation
Annual compounding on twelve thousand rupees at twenty percent for one year yields two thousand four hundred rupees. Semi-annual compounding applies a ten percent rate over two periods, yielding two thousand five hundred twenty rupees. Subtracting the annual interest from the semi-annual interest produces a variance of exactly one hundred twenty rupees. Compound interest calculations increase principal amounts based on frequency intervals specified within financial agreements. Semi-annual compounding divides the annual percentage rate by two and doubles the total number of compounding periods. Finding the financial variance requires computing total accrued interest under both compounding frequency rules.
Option A suggests one hundred forty rupees which overestimates the variance between the two compounding methods. Option C proposes one hundred thirty rupees which fails to match the exact mathematical compounding difference. Option D implies one hundred ten rupees which underestimates the precise semi-annual interest accrual calculation.
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- Mathematics
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- Mathematics
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- medium
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