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Meena took a loan of Rs 8000 at 20 percent per annum compound interest compounded semi annually. She repaid the loan after two years. Had she repaid the loan after a year, how much money she could have saved?

Meena took a loan of Rs 8000 at 20 percent per annum compound interest compounded semi annually. She repaid the loan after two years. Had she repaid the loan after a year, how much money she could have saved? Correct Answer Rs. 2,032.8

Given:

Principal is Rs. 8,000

Rate of interest is 20% half-yearly

Time is 2 years

Concept used:

In case of amount is compounded half yearly the rate of interest becomes half and time becomes double.

Formula used:

A = P(1 + r/100)n

Where,

P is Principle

r is Rate of interest

n is time in year

Calculation:

Rate of interest = 20/2

⇒ Rate of interest = 10%

Time = 4 half years

According to the first condition,

A1 = 8,000(1 + 10/100)4

⇒ A1 = 8,000(11/10)4

⇒ A1 = 8,000 × 11/10 × 11/10 × 11/10 × 11/10

⇒ A1 = Rs. 1,1712.8

According to the second condition,

A2 = 8,000( 1 + 10/100)2

⇒ A2 = 8,000(11/10)2

⇒ A2 = 8,000 × 11/10 × 11/10

⇒ A2 = Rs. 9,680

According to the question,

A1 - A2 = 11,712.8 - 9,680

⇒ A1 - A2 = Rs. 2,032.8 

∴ The difference is Rs. 2,032.8.

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