All Exams Test series for 1 year @ ₹349 only
Question

At what rate of interest per annum will a sum of ₹8,000 amount to ₹15,625 in 1 year and 6 months, if the interest is compounded half-yearly?

The correct answer is
50%

This problem requires us to find the annual rate of interest ('R') given the principal amount ('P'), the final amount ('A'), the time period ('t'), and the compounding frequency (half-yearly).

Compound Interest Problem Setup

We are given the following information:

  • Principal Amount (P) = ₹8,000
  • Final Amount (A) = ₹15,625
  • Time Period (t) = 1 year and 6 months = 1.5 years
  • Interest is compounded half-yearly.

We need to find the Rate of Interest (R) per annum.

Calculating the Interest Rate

Since the interest is compounded half-yearly, we need to adjust the time period and the rate of interest accordingly.

  • Number of compounding periods (n): The time period is 1.5 years. Since compounding occurs twice a year (half-yearly), the total number of periods is $n = \text{Time in years} \times 2$. $n = 1.5 \times 2 = 3$ periods.
  • Rate of interest per period (r): The annual rate is R. For half-yearly compounding, the rate per period is half of the annual rate, so $r = \frac{R}{2}$. However, in the compound interest formula, we usually use the rate per period directly as a decimal. So, the rate per period is $\frac{R/2}{100} = \frac{R}{200}$.

The formula for the final amount (A) with compound interest is:

$$ A = P \left(1 + \frac{r}{100}\right)^n $$

Substituting the rate per period (R/2) into the formula, we get:

$$ A = P \left(1 + \frac{R}{2 \times 100}\right)^n $$

$$ A = P \left(1 + \frac{R}{200}\right)^n $$

Now, let's plug in the given values:

$$ 15625 = 8000 \left(1 + \frac{R}{200}\right)^3 $$

To solve for R, we first isolate the term containing R:

$$ \frac{15625}{8000} = \left(1 + \frac{R}{200}\right)^3 $$

Let's simplify the fraction $\frac{15625}{8000}$:

  • Divide both numerator and denominator by 5: $\frac{3125}{1600}$
  • Divide by 5 again: $\frac{625}{320}$
  • Divide by 5 again: $\frac{125}{64}$

So, the equation becomes:

$$ \frac{125}{64} = \left(1 + \frac{R}{200}\right)^3 $$

We need to find the cube root of both sides. We know that $5^3 = 125$ and $4^3 = 64$. Therefore:

$$ \left(\frac{5}{4}\right)^3 = \left(1 + \frac{R}{200}\right)^3 $$

Now, we can equate the bases:

$$ \frac{5}{4} = 1 + \frac{R}{200} $$

Determining the Annual Rate

Let's solve for R:

  • Subtract 1 from both sides: $$ \frac{5}{4} - 1 = \frac{R}{200} $$
  • Simplify the left side: $$ \frac{5 - 4}{4} = \frac{R}{200} $$ $$ \frac{1}{4} = \frac{R}{200} $$
  • Multiply both sides by 200 to find R: $$ R = \frac{1}{4} \times 200 $$ $$ R = 50 $$

The rate of interest is 50% per annum.

Was this answer helpful?

Important Questions from Compound Interest

  1. At what rate percent per annum will Rs. 7200 amount to Rs. 7938 in one year, if interest is compounded half yearly?

  2. What is the compound interest (in Rs.) on a sum of Rs. 8192 for \(1 \frac{1}{4}\)  years at 15% per annum, if interest is compounded 5-monthly ?

  3. What is the difference (in Rs.) between the interests on Rs. 50,000 for one year at 8% per annum compounded half yearly and yearly?

  4. A sum of money becomes Rs. 11,880 after 4 years and Rs. 17,820 after 6 years on compound interest, if the interest is compounded annually. What is the half of the sum (in Rs.)?

  5. A sum invested at compound interest amounts to Rs. 7,800 in 3 years and Rs. 11,232 in 5 years. What is the rate per cent?

Need Expert Advice?

Start Your Preparation with Prepp Mobile App

Download the app from Google Play & App Store
Download the app from Google Play & App Store
Prepp Mobile App