Bank A offers 6% interest rate per annum compounded half yearly. Bank B and Bank C offer simple interest but the annual interest rate offered by Bank C is twice that of Bank B. Raju invests a certain amount in Bank B for a certain period and Rupa invests ₹ 10,000 in Bank C for twice that period. The interest that would accrue to Raju during that period is equal to the interest that would have accrued had he invested the same amount in Bank A for one year. The interest accrued, in INR, to Rupa is
Started 1 month ago by Shashank in
Explanatory Answer
Bank A has a rate of interest of 6% and compounds half yearly.
This is the same as having a 3% interest rate per half-year.
So, if a Principal, P is invested for an year in bank A, at the end of the year it becomes P(1.03)(1.03) = P(1.0609)
Therefore the interest rate when viewed as a Simple interest scheme is 6.09% per annum.
Rupa invested in Bank C, which has twice the interest rate as Bank B and the quantum for which the investment is made is also double, hence Rupa effectively gets 4 times the interest that Raju gets for the same investment in Bank A.
Let’s say Raju invested ₹ 10,000 in Bank B.
Since this is the same as investing in Bank A for 1 year, his interest would be 6.09% of 10,000 = ₹ 609.
Now, for the same investment, Rupa must earn 4 times that of ₹ 609
So, Rupa earns ₹ 2,436
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