Question : A man deposited INR 10,000 at simple interest in a fund. The interest rate on the fund increases by 4% every year. If the interest rate at the time of the amount deposit was 8%, what is the interest earned (in INR) by him after 5 years?
Option 1: 6,000
Option 2: 8,400
Option 3: 5,800
Option 4: 8,000
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Correct Answer: 8,000
Solution :
Money deposited, $P$ = INR 10,000
Initial rate of interest = 8%
The rate of interest increases by 4% every year.
Simple interest = $\frac{\text{Principal × Rate × Time}}{100}$
For 5 years, simple interest
= $\frac{P(r_1+r_2+r_3+r_4+r_5)}{100}$ (where $r_1,r_2,r_3,r_4,$ and $r_5$ are rate of interests for 5 years.)
= $\frac{10000(8+12+16+20+24)}{100}$
= $8000$
Hence, the correct answer is 8000.
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