Question : The compound interest on Rs. 1,00,000 at 25% per annum for 2 years compounded annually is:
Option 1: Rs. 57,650
Option 2: Rs. 50,250
Option 3: Rs. 56,250
Option 4: Rs. 52,255
Correct Answer: Rs. 56,250
Solution :
Given that P = Rs.1,00,000, $r$ = 25% and $t$ = 2 years
Compound Interest = 100,000(1 + $\frac{25}{100})^{2}$ – P
⇒ Compound Interest = 100000$({1 + \frac{1}{4}}) ^{2}$ – 100000
= 100000$({\frac{5}{4}}) ^{2}$ – 100000
= 100000$[\frac{25}{16}-1]$
= 100000$[\frac{9}{16}]$
= Rs. 56250
Hence, the correct answer is Rs. 56,250.
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