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Question

A principal of 40,000 is compounded annually at the rate of 10% for 2 years. What is the compound interest and is it greater than the simple interest for the same rate and the same time?


A

Rs 8400 ,Yes

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B

4800 , Yes

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C

Rs 7000, no

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D

No

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Solution

The correct option is A

Rs 8400 ,Yes


Given that P = ₹ 40,000 ; n = 2 years and R = 10 %

In compound interest, interest is calculated annually.
A=P(1+R100)2
A=40000(1+10100)2
A=40000(11×1110×10)
A=48,400
Hence C.I = 48,400- 48000 = ₹ 8400

SI =P×N×R100 = 40,000×10×2100 = ₹ 8,000

.'. Amount = ₹ 48,000

The simple interest is ₹ 8000 and compound interest is ₹ 8400.
C.I > S.I


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