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Exercise 5.2 · Q24

Q.Venessa invests ₹5000 in a bond that pays 6% interest compounded semi-annually. The value of the bond in rupees after 5 years is:

(i) 5000(1.06)55000(1.06)^5
(ii) 5000(1.03)55000(1.03)^5
(iii) 5000(1.06)105000(1.06)^{10}
(iv) 5000(1.03)105000(1.03)^{10}
Sikkim CbseNCERTSubjective· 1mImportance★★★★★est
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With semi-annual compounding the yearly rate is halved and the number of periods doubled, giving A=5000(1.03)10A=5000(1.03)^{10} — option (iv).

[!FORMULA] A=P(1+rk)ktA=P\left(1+\dfrac{r}{k}\right)^{kt}

PP = principal, rr = nominal annual rate, kk = number of compounding periods per year, tt = time in years.

  1. Given P=5000, r=6%=0.06P=5000,\ r=6\%=0.06 per year, compounded semi-annually so k=2k=2, and t=5t=5 years. …

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