Question

The CI on ₹ 5000 at 10% p.a. compounded annually for 2 years is ______.

Options

• ₹ 1000

• ₹ 1050

• ₹ 1200

• ₹ 1250

Answer 1

The CI on ₹ 5000 at 10% p.a. compounded annually for 2 years is ₹ 1050.

Explanation:

Step 1: Compound interest formula

`A = P(1 + r/100)^n`

Where:

• A = Amount after n years
• P = 5000 (Principal)
• r = 10% (Rate of interest)
• n = 2 years

CI is calculated as CI = A – P

Step 2: Find the amount after 2 years

`A = 5000(1 + 10/100)^2`

`A = 5000 xx (1.1)^2`

`1.1 xx 1.1 = 1.21`

`A = 5000 xx 1.21 = 6050`

Step 3: Find the compound interest

CI = A – P

= 6050 – 5000

= 1050