Question

Find the compound interest on ₹5000 at 10% per annum for 2 years.

• A. ₹1000
• B. ₹1025
• C. ₹1050
• D. ₹1100

Hint:

For 2 years at 10%, the effective interest rate is always $21\%$ ($10 + 10 + \frac{10 \times 10}{100}$).
$21\% \text{ of } 5000 = 1050$. This is much faster for multiple-choice questions!

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Compound Interest (CI) is calculated on the principal amount plus any accumulated interest from previous periods. The total amount ($A$) is calculated first, then the principal is subtracted to find the interest.

Step 2: Key Formula or Approach:
1. $A = P\left(1 + \frac{R}{100}\right)^n$
2. $CI = A - P$

Step 3: Detailed Explanation:
Given: $P = 5000$, $R = 10\%$, $n = 2$ years. \[ A = 5000 \left(1 + \frac{10}{100}\right)^2 \] \[ A = 5000 \left(\frac{11}{10}\right)^2 \] \[ A = 5000 \times \frac{121}{100} \] \[ A = 50 \times 121 = 6050 \] Now, find CI: \[ CI = A - P = 6050 - 5000 = 1050 \]

Step 4: Final Answer:
The compound interest is ₹1050.