Question

The compound interest on ₹ 50,000 at 4% per annum for 2 years compounded annually is

• A. ₹ 4,000
• B. ₹ 4,080
• C. ₹ 4,280
• D. ₹ 4,050

Answer 1

The correct option is B ₹ 4,080

Given, principal (P) = ₹ 50000
Rate of interest (R) = 4% per annum
Time period (T) = 2 yrs

We know that amount,
$A=P{(1+\frac{R}{100})}^T$
$\therefore A=50000{(1+\frac{4}{100})}^2$
$=50000{(1+\frac{1}{25})}^2=50000\times \frac{26}{25}\times \frac{26}{25}=54080$

$\therefore$ Compound interest, CI = A - P = ₹ 54080 - ₹ 50000 = ₹ 4080