Mr. A invested Rs. 5000 in a term deposit scheme which provides interest at the rate of 6% per annum compounded semi-annually for first year and compounded quarterly for second year at same rate and compounded annually for the next two years at the rate of 8% per annum. Calculate the amount of interest to be received by Mr. A after four years.?

Option 3 : Rs. 1567

As we know, compound interest is calculated on interest as well. So, we will calculate the compound amount step by step:

Compound amount after 1 year:

⇒ 5000 {1 + (0.06/2)}²,

⇒ 5000 {1 + 0.03}²,

⇒ 5000 {1.03}²,

⇒ 5000 × 1.0609,

⇒ 5304.5

Compound amount after 2 years:

⇒ 5304.5 {1 + (0.06/4)}⁴,

⇒ 5304.5 {1 + 0.015}⁴,

⇒ 5304.5 {1.015}⁴,

⇒ 5304.5 × 1.0614,

⇒ 5630

Compound amount after 4 years:

⇒ 5630 {1 + 0.08}²,

⇒ 5630 {1.08}²,

⇒ 5630 × 1.1664,

⇒ 6566.832

⇒ Compound interest received during four years = Compound amount after 4 years – Principal = 6566.832 – 5000 = 1566.832 ≈ Rs. 1567