Question

Find the compound interest on ₹ 3200 at 2.5% p.a for 2 years, compounded annually.

• A. ₹ 162
• B. ₹ 170
• C. ₹ 186
• D. ₹ 194

Answer 1

The correct option is A ₹ 162

Given that,
Principle = ₹ 3200
Rate = 2.5%
Time = 2 years, compounded annually

We know that,
Amount = A = P[1 + (R/100)]${}^n$
Compound interest = Amount - Principal

Now, putting the given values into the formula

A = P[1 + (R/100)]${}^n$

= 3200 $\times$ [1 + (2.5/100)]${}^2$

= 3200 $\times$ (1.050625)

= ₹ 3362

Hence, Compound interest
= ₹ 3362 - ₹ 3200
= ₹ 162