Question : A man saves Rs. 2000 at the end of each year and invests the money at 5% compound interest. At the end of 3 years, he will have:
Option 1: Rs. 4305
Option 2: Rs. 6305
Option 3: Rs. 4205
Option 4: Rs. 2205
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Correct Answer: Rs. 6305
Solution : We know, $\text{Total Amount}=\text{Principal}×(1+\frac{\text{Rate}}{100})^{\text{Time}}$ $=2000(1+\frac{5}{100})^2+2000(1+\frac{5}{100})$ $=2000(\frac{21}{20})^2+2000(\frac{21}{20})$ $=2000\times \frac{441}{400}+2100$ $=2205+2100$ $=4305$ Amount after two years = Rs. 4305 $\therefore$ At the end of 3 years, he will have = 4305 + 2000 = Rs. 6305 Hence, the correct answer is Rs. 6305.
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