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Question

A person invests ₹ 10,000 for two years at a certain rate of interest compounded annually. At the end of one year this sum amounts to ₹ 11,200 ,Calculate;

(i) the rate of interest per annum

(ii) the amount at the end of the second year


A

(i) 12 % (ii) ₹ 12,000

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B

(i) 12 % (ii) ₹ 12,544

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C

(i) 12 % (ii) ₹ 10,000

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D

(i) 10 % (ii) ₹ 12,000

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Solution

The correct option is B

(i) 12 % (ii) ₹ 12,544


Let the rate of interest be r
A= P(1 + r100)n

Given that A = ₹ 11,200 P = ₹ 10,000 n = 1 year

11,200 = 10,000(1 + r100)1
11,20010,000 = (1 + r100)
112100 = ( 100+r100)
r = 112 - 100
= 12 %

(ii) A= P(1 + r100)n
= 10000(1 + 12100)2
= 10000(100+12100)
= ₹ 12,544


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