Question

If a sum of ₹ 20,000 is borrowed by Heena for 2 years at an interest of 8% compounded annually, then the amount she has to pay at the end of 2 years is

• A. ₹ 23,238
• B. ₹ 21,238
• C. ₹ 23,328
• D. ₹ 21,328

Answer 1

The correct option is C

₹ 23,328

We know that S.I. = $\frac{PRT}{100}$

where, S.I. is the simple interest, P is the principal, R is the rate of interest per annum and T is the time(number of years).

Let the principal for the first year be $P_1$.
Here, $P_1$ = ₹ 20000

$S{I}_1$ = Simple Interest at 8% per annum for first year = $\frac{20000\times 8}{100}$ = ₹ 1600

Amount at the end of first year
= $P_1$ + $S{I}_1$
= 20,000 + 16,00 = ₹ 21600

This becomes principal for the next year.

Interest for the second year = $\frac{21600\times 8}{100}$ = ₹ 1728

Total amount to be paid back
= ₹ 21600 + ₹ 1728 = ₹ 23,328