Question

Maria invested ₹8,000 in a business. She would be paid interest at 5% per annum compounded annually. Find the interest for the third year.

• A. ₹441
• B. ₹428
• C. ₹448
• D. ₹452

Answer 1

The correct option is A

₹441

Here, Principal (P) = ₹8,000

Rate of interest (R) = 5%

For n = 2 years
Amount (A) = $P{(1+\frac{R}{100})}^n$

=$8000{(1+\frac{5}{100})}^2$

=$8000{(1+\frac{1}{20})}^2$
=$8000{\left(\frac{21}{20}\right)}^2$

=$8000\times \frac{21}{20}\times \frac{21}{20}$
=₹8,820

For n = 3 years
Amount (A) = $P{(1+\frac{R}{100})}^n$

=$8000{(1+\frac{5}{100})}^3$

=$8000{(1+\frac{1}{20})}^3$
=$8000{\left(\frac{21}{20}\right)}^3$

=$8000\times \frac{21}{20}\times \frac{21}{20}\times \frac{21}{20}$
=₹9,261
Interest for 3rd year = Amount for 3 years - Amount for 2 years = ₹9261 - ₹8820 = ₹441