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Quarterly Compounding 

Means that there are four compounding periods within the year. Instead of paying the interest once a year, it is paid in four equal installments after every three months. Using the above illustration, there will be eight compounding periods and the rate of interest for each compounding period will be 1:5 pet cent, that is 1/4 of 6 per cent).

Table 2.3 presents the relevant calculations regarding the amount he will have at the end of two years, when interest is compounded quarterly. At the end of the first year, his savings will accumulate to Rs 1,061.363 and at the end of the second year he will have; Rs 1,12~.4.9.

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