How much interest will Tk. 1000 earn in one year at an annual interest rate of 20% if interest rate is compounded every 6 months?

A 200

B 205

C 110

D 208

Correct Answer: Option E

Formula:

A = P ( 1 + r/2)2n

and, C.I = A - P Where,

P = principal R = rate in percent p.a.( per annum i.e. annually) n = number of years.

Here, P = 1000,

R = 20% and n = 1 year. Amount after 1 year = P ( 1 + r/2)2n = 1000 ( 1 + 0.20/2)2*1 = 1000 ( 1 + 0.1)2 = 1000 (1.1)2 = 1000 x 1.21 Amount = 1210

∴Compounded Interest=A−P.

C.I=1210−1000

C.I= 210