Question 7

What is the compound interest on Rs. 48,000 for 2 years at 20 % p.a., if interest is compounded annually?

Solution

Amount = $$ P(1 + \frac{r}{100})^n$$

where

P = Principal

r = rate of interest

n = number of years

Amount after two years = $$ 48000(1 + \frac{20}{100})^2$$ = 69120

Compound Interest = 69120 - 48000 = 21,120

So , the answer would be option b)Rs. 21,120

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