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Question
Calculate the C.I. on Rs. 3,500 at 6% per annum for 3 years, the interest being compounded half-yearly.
Do not use mathematical tables. Use the necessary information from the following:
(1.06)3 =1.191016; (1.03)3 = 1.092727
(1.06)6 =1.418519; (1.03)6 = 1.194052
Solution
Given : P = Rs. 3,500; r = 6% and n = 3 years
Since interest is being compounded half-yearly
Then, `"C.I." = "P"[( 1 + r/[ 2 xx 100 ])^(n xx 2) - 100]`
= 3,500`[( 1 + 6/[ 2 xx 100 ])^(n xx 2) - 1 ]`
= 3,500`[(103/100)^6 - 1]`
= 3,500[(1.03)6 - 1 ]
= 3,500[ 1.194052 - 1 ]
= 3,500 x 0.194052
= Rs. 679.18
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