The time period after which the interest is added each time to form a new principal is called the _________
Solution:
The time period after which the interest is added each time to form a new principal is called the Conversion period.
✦ Try this: What will be the conversion period if a sum of money (P) is invested for ‘n’ years at a rate of r% per annum and interest is compounded quarterly?
The formula for determining compound interest is :
A = P(1 + r/100)n --- (1)
Compound Interest = A - P
A = Amount at end of n years
P = Sum invested for n years
r = annual rate of interest compounded annually
If the interest is compounded quarterly the equation gets modified accordingly.
Effective rate of interest = r/4
Conversion period = 4n
If n = number of years then conversion period will be based on the frequency of compounding. If the interest is compounded quarterly i.e. every three months (4 times a year), the conversion period becomes 4 × ‘n’ = 4n
If interest is compounded monthly then conversion period will be 12n. The rate of interest will accordingly change.
If the interest is compounded daily then the conversion period will be 365n and the applicable rate of interest will daily rate of interest.
☛ Also Check: NCERT Solutions for Class 8 Maths Chapter 8
NCERT Exemplar Class 8 Maths Chapter 9 Problem 29
The time period after which the interest is added each time to form a new principal is called the _________
Summary:
The time period after which the interest is added each time to form a new principal is called the Conversion period
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