Question : What is the compound interest on a sum of INR 37,500 for $1 \frac{1}{3}$ years at a rate of 12% p.a. if the interest is compounded 8 - monthly?
Option 1: INR 6,420
Option 2: INR 6,448
Option 3: INR 6,240
Option 4: INR 6,440
Correct Answer: INR 6,240
 
  Solution :
 
 Amount = $P(1+\frac{r}{100})^{t}$
 
  $P$ = Principal
  
  $r$ = rate
  
  $t$ = time
  
  According to the question,
  
  $r$ = $\frac{12}{12}$ × 8 =  8% per 8-months
  
  $t$ = $\frac{16}{8}$ = 2 terms
  
  Now,
  
  ⇒ Amount $= 37500 × (1+\frac{8}{100})^{2} = 37500 × (\frac{27}{25}) × \frac{27}{25} = 43740$
  
  $\therefore$ Compound interest = 43740 – 37500 = 6240
  
  Hence, the correct answer is INR 6,240.
 
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