Question:
The compound interest on Rs 50,000 at 4% per annum for 2 years compounded annually is
(a) Rs 4,000
(b) Rs 4,080
(c) Rs 4,280
(d) Rs 4,050
Solution:
(b) Rs 4,080
Explanation: P = Rs.50000, R = 4%, T = 2 years
A = P(1+R/100)T = 50000(1+4/100)2 = 50000(1+1/25)2
A = 50000(26/25)2 = 54080
Compound interest = A – P = 54080 – 50000 = Rs. 4080