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Question
The compound interest on Rs 50,000 at 4% per annum for 2 years compounded annually is ______.
Options
Rs 4,000
Rs 4,080
Rs 4,280
Rs 4,050
Solution
The compound interest on Rs 50,000 at 4% per annum for 2 years compounded annually is Rs 4,080.
Explanation:
Given, principal (P) = Rs. 50000
Rate of interest (R%) = 4% per annum
Time period (T) = 2 years
We know that,
`A = P(1 + R/100)^T`
∴ `A = 50000(1 + 4/100)^2`
= `50000(1 + 1/25)^2`
= `50000 xx 26/25 xx 26/25`
= 80 × 26 × 26
= Rs 54080
∴ Compound interest, CI = A – P
= Rs 54080 – Rs 50000
= Rs 4080
Hence, Rs 4,080
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