A person deposits a certain amount of money at the interest rate of 20% per annum compounded twice a year. If the person gets Rs. 302.50 after 1 year, then what will be the amount he invested in the starting?
2019-08-27 | Team PendulumEdu
A. Rs. 294
B. Rs. 240
C. Rs. 250
D. Rs. 280
Amount (A) obtained on a principal amount (P), which is subjected to a compound interest rate (R) for a time period of (T) is given as
Rate (R) = 20% per annum compounded twice a year
Time (T) = 1 year
Amount = Rs. 302.5
Let the principal amount he/she invested in the staring be Rs. P
For Periodic compounding within a year
Effective rate is taken as (1/n)th times of rate given and effective time is taken as nth times of the time period given
Rate of interest compounded twice a year means Rate of interest compounded half yearly
So, Effective rate = 20/2 = 10%
And, Effective time period = 2*1 = 2
Now, Actual amount obtained because of compounding will be
P = 2.5*100 = Rs. 250
Hence, (C) is the correct answer.
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