What is the difference in the total interest obtained on Rs. 10000 at the rate…

Step-by-Step Solution

To find the difference in total interest, we must calculate the compound interest for both compounding scenarios over the 2-year period.

1. Calculate Interest Compounded Semi-annually:

   • Principal (P) = Rs. 10,000

   • Annual rate = 10%

   • Semi-annual rate = 10% / 2 = 5%

   • Number of periods (n) = 2 years * 2 = 4 periods

   • Amount = 10,000 * (1 + 0.05)^4 = 10,000 * (1.05)^4 = 10,000 * 1.21550625 = Rs. 12,155.06

   • Interest = 12,155.06 - 10,000 = Rs. 2,155.06 (approximately Rs. 2,155)

2. Calculate Interest Compounded Biennially (every 2 years):

   • Since the total duration is exactly 2 years, compounding biennially means it happens only once.

   • Biennial rate = 10% * 2 = 20%

   • Number of periods (n) = 1

   • Amount = 10,000 * (1 + 0.20)^1 = 10,000 * 1.20 = Rs. 12,000

   • Interest = 12,000 - 10,000 = Rs. 2,000

3. Calculate the difference:

   • Difference = 2,155 - 2,000 = Rs. 155.