Question : What is the compound interest on a sum of INR 25,000 after three years at a rate of 12 percent per annum interest compounded yearly?
Option 1: INR 10,123.20
Option 2: INR 9,824.00
Option 3: INR 10,520.00
Option 4: INR 9,956.86
Correct Answer: INR 10,123.20
Solution :
Principal amount, $P$ = INR 25,000
Rate of interest, $R$ = 12 percent per annum
Time of investment, $T$ = 3 years
When compounded annually, Compound Interest
= $P(1+\frac{R}{100})^{T}-P$
= $25000(1+\frac{12}{100})^{3}-25000$
= $25000(\frac{28}{25})^3-25000$
= $\frac{28^3\times 8}{5}-25000$
= 35123.2 – 25000
= 10123.2
Hence, the correct answer is INR 10,123.20.
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