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How much amount needs to repaid if a sum of Rs.40000 is borrowed for 3 years at a rate of 5% per annum, compounded half-yearly?
Given :
Principal $= Rs. 40000$
Time $= 3$ years
Rate of interest $= 5$% per annum
To do :
We have to find the amount to be repaid.
Solution :
Interest is compounded half yearly, this implies
Rate of interest half yearly $= \frac{5}{2}$% $= 2.5$%.
Number of intervals n $= 3\times2 = 6$
Amount to be repaid $= A = P (1+ \frac{R}{100})^n$
$ = Rs. 40000 (1+\frac{2.5}{100})^6$
$= Rs. 40000(\frac{41}{40})^6$
$= Rs. 46387.7$.
Therefore, the amount to be repaid is Rs.46387.7.
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