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 bank has to pay to Mrs. S after $3$ years if interest is compounded annually.

• A. $7,000$
• B. $7,490$
• C. $8,014.30$
• D. $22,504.30$

Answer 1

Answer: (D)

$22,504.30$

Principle for first year Rs. $1,00,000$
Interest for first year $=$Pit
$1,00,000\times 7\%\times 1=7,000$
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 $=1,07,000\times 7\%\times 1=7,490$
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 $=Rs.1,14,490\times 7\%\times 1=Rs.8,014.30$
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. $1,22,504.30$.