Question

The compound interest on Rs 50,000 at 4% per annum for 2 years compounded annually is
(a) Rs 4,000
(b) Rs 4,080
(c) Rs 4,280
(d) Rs 4,050

Answer 1

Given, principal (P) = Rs. 50000
Rate of interest (R%) = 4% per annum
Time period (T) = 2 yr We know that,
$A=P{(1+\frac{R}{100})}^T$
$\therefore A=50000{(1+\frac{4}{100})}^2$
$=50000{(1+\frac{1}{25})}^2=50000\times \frac{26}{25}\times \frac{26}{25}=80\times 26\times 26$
$\therefore$ Compound interest, CI = A - P = Rs 54080 - Rs 50000 = Rs 4080
Hence, option (b) is correct.