Question: A bank offers 10% compound interest calculated half-yearly. A customer deposits Tk. 2000 on 1st January and another Tk. 2000 on 1st July of the same year. How much interest will he earn at the end of the year?
Solution:
Here,
Half-yearly interest rate = 10% ÷ 2 = 5%
Now,
The first deposit of Tk. 2000 was made on 1st January.
It stays for 12 months, so it earns interest twice (i.e., 2 half-years).
∴ A1 = P(1 + r/100)n
= 2000 × {1 + 5/100}2
= 2000 × (1.05)2
= 2000 × 1.1025
= 2205
Now,
The second deposit of Tk. 2000 was made on 1st July.
It stays for 6 months, so it earns interest only once (1 half-year).
∴ A2 = P(1 + r/100)n
= 2000 × (1 + 5/100)1
= 2000 × 1.05
= 2100
Total amount = 2205 + 2100 = 4305
Total money deposited = 2000 + 2000 = 4000
∴ Interest earned = 4305 - 4000 = Tk. 305
∴ The customer would have gained Tk. 305 by way of interest.