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Question

Mrs. S deposited Rs.1,00,000 in a nationalized bank for 3 years. If the rate of interest is 7% p.a., calculate the interest that banks has to pay to Mrs. S after 3 years if interest is compounded annually.

A
7,000
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B
7,490
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C
8,014.30
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D
22,504.30
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Solution

The correct option is D 22,504.30
Principal for first year Rs.1,00,000
Interest for first year =Pit
1,00,000×7% ×1=7,000
Principal for the second year = Principal for first year + Interest for first year
=Rs.1,00,000+Rs.7,000=Rs.1,07,000
Interest for second year =1,07,000×7% ×1=7,490
Principal for the third year = Principal for second year + Interest for second year
=1,07,000+7,490=1,14,490
Interest for the third year =Rs.1,14,490×7% ×1=Rs.8,014.30
Compound interest at the end of third year
=Rs.(7,000+7,490+8,014.30)
=Rs.22,504.30
Amount at the end of third year
=Principal (initial deposit) + compound interest
=Rs(1,00,000+22504.30)
=Rs.1,22,504.30.

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