Mathematics of FinanceMCQPYQ Nov 20Question 1208 of 512
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Find the compound interest if an amount of 50,000\displaystyle 50,000 is deposited in bank for one year at the rate of 8%\displaystyle 8\% per annum compounded semi-annually.

Options

A3,080\displaystyle 3,080
B4,080\displaystyle 4,080
C3,456\displaystyle 3,456
D7,856\displaystyle 7,856
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Correct Answer

Option b4,080\displaystyle 4,080

All Options:

  • A3,080\displaystyle 3,080
  • B4,080\displaystyle 4,080
  • C3,456\displaystyle 3,456
  • D7,856\displaystyle 7,856

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Detailed Solution & Explanation

**Derivation of Compound Interest** Given: - Principal (P\displaystyle P) = Rs. 50,000\displaystyle \text{Rs. }50,000 - Rate of Interest (r\displaystyle r) = 8%\displaystyle 8\% per annum compounded semi-annually - Time (t\displaystyle t) = 1\displaystyle 1 year **Step 1: Calculate periodic rate (i\displaystyle i) and number of periods (n\displaystyle n)** - Periodic rate i=r2=8%2=4%=0.04\displaystyle i = \frac{r}{2} = \frac{8\%}{2} = 4\% = 0.04 per half-year. - Number of periods n=t×2=1×2=2\displaystyle n = t \times 2 = 1 \times 2 = 2 half-years. **Step 2: Calculate Future Value (A\displaystyle A) and Compound Interest (CI\displaystyle CI)** A=P(1+i)nA = P(1 + i)^n A=50000(1+0.04)2A = 50000(1 + 0.04)^2 A=50000(1.04)2A = 50000(1.04)^2 A=50000×1.0816=Rs. 54,080A = 50000 \times 1.0816 = \text{Rs. }54,080 CI=AP=5408050000=Rs. 4,080CI = A - P = 54080 - 50000 = \text{Rs. }4,080 Hence, **Option B** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

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