Dinesh makes a fixed deposit of Rs 50000 in a bank for one...

Dinesh makes a fixed deposit of Rs 50000 in a bank for one year. If the rate of interest is $12 \%$ per annum, compounded half yearly, then find the maturity value.
(1) Rs 66125
(2) Rs 56180
(3) Rs 57500
(4) Rs 63250

Key Concepts

Compound Interest

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. This means that interest is earned on interest, which can increase the investment significantly over time compared to simple interest calculations.

Compounding Frequency

Compounding frequency refers to the number of times the accrued interest is added to the principal balance in a given period. A more frequent compounding period, such as half-yearly or quarterly, results in interest being calculated and added more frequently, thereby increasing the overall accumulated amount.

Principal

The principal is the original sum of money invested or loaned. It acts as the base amount on which interest computations are made, and in many finance problems, the principal is the starting point from which the growth of the investment is calculated.

Interest Rate

The interest rate is the percentage at which interest is calculated on the principal over a specified period. It is a crucial parameter in financial calculations and needs to be adjusted if the compounding period differs from one year, so that the rate reflects the period of compounding.

Maturity Value Calculation

The maturity value is the sum of the principal and the accumulated interest at the end of the investment period. It is calculated using the compound interest formula, which takes into account the principal amount, the periodic interest rate, the number of compounding periods, and the total time duration.

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