Question

what will be the compound interest on a sum of rs 1200 for 2 years at the rate of 20% per annum. when the interest is compounded annually 1) Rs 624 2) Rs 504 3) Rs 576 4) Rs 528

Answer 1

Given principal is Rs. 1200

Time = 2 years

Rate of interest = 20%

What is compound interest?

Compound interest is when you receive interest on both your interest income and your savings.

The formula for finding compound interest = $A(1+\frac{r}{100})^n-A$

where A = Principal = Rs. 1200

r = rate of interest = 20

n = time = 2

Now

$1200 \times (1+\frac{20}{100})^2-1200\\=1200 \times (1+\frac{1}{5})^2-1200\\=1200 \times (\frac{5+1}{5})^2-1200\\=1200 \times (\frac{6}{5})^2-1200\\=1200 \times \frac{6}{5} \times \frac{6}{5}-1200\\=48 \times 6 \times 6-1200\\=1728-1200\\=528$

Therefore, the interest of compound interest is Rs. 528.

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Answer 2

So the correct option is 4(Rs 528)

The formula for finding compound interest $= A(1+\frac{r}{100} )^n - A$

where A = Principal = Rs. 1200

r = rate of interest = 20

n = time = 2

Now

$1200 \times (1+\frac{20}{100} )^2 - 1200\\= 1200 \times (1+\frac{1}{5})^2 - 1200\\= 1200 \times (\frac{5+1}{5} )^2 - 1200\\= 1200 \times (\frac{6}{2})^2 - 1200\\= 1200 \times \frac{6}{5} \times \frac{6}{5} - 1200\\ = 48 \times 6 \times 6 - 1200\\= 1728 - 1200\\= 528$

Therefore, the interest of compound is Rs. 528

Compound Interest

Compound interest is the adding of interest to the principle sum of a loan or deposit, or interest on interest plus interest. It is the outcome of reinvesting interest, or adding it to the lent capital, rather than paying it out or requesting payment from the borrower, so that interest is received on the principle sum plus previously accrued interest in the next month. In finance and economics, compound interest is the norm.

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