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Govind took a loan of Rs. 12,000 from a bank for a period of 1 year. If the bank charges compounded interest quarterly at the rate of 16% p.a., how much interest has he to pay to the bank?
Given:
Principal $P=Rs.\ 12000$
Time $T=1\ year$
Rate of interest $r=16 \%$
To do:
We have to find the compound interest when the rate of interest is compounded quarterly.
Solution:
Time $= 1$ year
Rate of interest $=16 \%$ per annum compounded quarterly
Number of compounds $=4$
Amount $= P(1+\frac{\frac{r}{4}}{100})^{nT} $
$= 12000(1+\frac{\frac{16}{4}}{100})^{4 \times 1}$
$= 12000(\frac{104}{100})^4$
$= 12000(1.04)^4 $
$=Rs.\ 14038.30$
Compound Interest $=$ Amount $-$ Principal
$=Rs.\ (14038.30-12000)$
$=Rs.\ 2038.30$
Therefore, he has to pay Rs. 2038.30 as interest to the bank.
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