Question : What is the compound interest on INR 62,500 for 2 years at 8% per annum compounded yearly?
Option 1: INR 10,500
Option 2: INR 10,300
Option 3: INR 10,400
Option 4: INR 10,600
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Correct Answer: INR 10,400
Solution :
When compounded annually, $ A= P(1+\frac{R}{100})^{n}$, Where $A$ is the total amount, $P$ is the principal amount, $R$ is the rate of interest per annum, and $n$ is the time in years.
Given: $P$ = Rs. 62500
$R$ = 8%
$n$ = 2 years
We know that,
$A = P(1+\frac{R}{100})^n$
$A = 62500(1+\frac{8}{100})^2$
= $62500(\frac{27}{25})^2$
= $\frac{62500×27×27}{25×25}$
= 72900
Compound interest = $A – P$
= 72900 – 62500 = 10400
Hence, the correct answer is INR 10,400.
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