The compound interest on Rs 50,000 at

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

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