Michael borrowed Rs.16000 from a finance company at 10% per annum, compounded half-yearly. What amount of money will discharge his debt after 1years?

Present value = Rs.16000


Interest rate = 10% per annum


Time = (3/2) years


∵ Interest is compounded half-yearly.


∴ Amount (A) = P [1 + (R/2)/100]2n [Where, P = Present value


R = Annual interest rate


n = Time in years]


∴ A = 16000 [1 + (10/2)/100]3


⇒ A = 16000 [1 + 5/100]3


⇒ A = 16000 [1 + 1/20]3


⇒ A = 16000 [21/20]3


⇒ A = 16000 × 21/20 × 21/20 × 21/20


⇒ A = 2 × 21 × 21 × 21


⇒ A = 18522


∴ Amount = Rs.18522


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