Question Of The Day

The Banaras bank gives 10% rate of interest and compounds the interest due half-yearly. The Bank of Varanasi compounds the interest yearly. If the same amount is kept in both the banks now, the sum realized after 3 years is same on both cases. What rate of interest does Bank of Varanasi offer?  

a) 10%

b) 25%

c) 10.75%

d)  11.21%

Ans: b) 10.25%

P(1 + (10/2)/100)⁶ = P(1+ r/100)³. ∴ (1+ r/100) = 1.05² or 10.25%.