If Rs. 1000 is invested at 12% interest and interest is compounded half yearly, what will be the total amount at the end of one year ?

Use the compound‑interest formula A = P(1 + r/n)^{nt}, where P = 1000, r = 0.12, n = 2 (semiannual), and t = 1 year. Semiannual compounding means the periodic rate is r/2 = 0.06 and there are two periods in a year. Thus A = 1000 × (1 + 0.06)^2 = 1000 × 1.06^2 = 1000 × 1.1236 = 1123.60. This result reflects the increase in effective annual yield due to compounding within the year (compounding raises the effective rate above the nominal 12%) [1]. Therefore the correct choice is option 2: Rs. 1123.60.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.4 Securities > p. 43