Answer:
The interest generated the first year will be 10% of the initial value, while the second year that interest will increase to 10.25%.
Step-by-step explanation:
Given that a person deposits Rs 55000 in Bank P for 2 years at the rate of 10% per annum compounded annually, but after one year, bank has changed the policy and decided to pay semi annual compounded interest at the same rate, to determine what is the percentage difference between the compound interests of the first year and second year, the following calculation must be performed:
Year 1 =
55,000 x (1 + 0.1 / 1) ^ 1x1 = X
55,000 x 1.1 = X
60,500 = X
Year 2 =
60,500 x (1 + 0.1 / 2) ^ 1x2 = X
60,500 x 1.05 ^ 2 = X
66,701.25 = X
55,000 = 100
60,500 = X
60,500 x 100 / 55,000 = X
110 = X
60,500 = 100
66,701.25 = X
66,701.25 x 100 / 60,500 = X
110.25 = X
The interest generated the first year will be 10% of the initial value, while the second year that interest will increase to 10.25%.