Calculate the compound interest earned on a principal of Rs. 5000 at an annual interest rate of 4%, compounded half-yearly, over a period of 1.5 years.

Explanation

To find the compound interest, first determine the number of compounding periods: 1.5 years × 2 = 3 half-year periods. The half-yearly interest rate is 4% ÷ 2 = 2%. Using the formula A = P(1 + r)^n = 5000 × (1 + 0.02)^3 = 5000 × 1.061208 = Rs. 5306.04. The compound interest is the total amount minus the principal: 5306.04 - 5000 = Rs. 306.04.