What is the compound interest on Rs. 48,000 for 2 years at 20 % p.a., if interest is compounded annually?Options69,12076,80072,00021,120
Question
What is the compound interest on Rs. 48,000 for 2 years at 20 % p.a., if interest is compounded annually?
Options:
- 69,120
- 76,800
- 72,000
- 21,120
Solution
To calculate the compound interest, we can use the formula:
A = P (1 + r/n) ^ nt
Where: A = the amount of money accumulated after n years, including interest. P = principal amount (the initial amount of money) r = annual interest rate (in decimal) n = number of times that interest is compounded per year t = time the money is invested for in years
Given: P = Rs. 48,000 r = 20% per annum = 0.20 n = 1 (since it is compounded annually) t = 2 years
Let's calculate:
A = 48000 (1 + 0.20/1) ^ (1*2) A = 48000 (1 + 0.20) ^ 2 A = 48000 (1.20) ^ 2 A = 48000 * 1.44 A = Rs. 69,120
So, the amount after 2 years will be Rs. 69,120.
Now, to find the compound interest, we subtract the principal from the amount:
Compound Interest = A - P Compound Interest = 69120 - 48000 Compound Interest = Rs. 21,120
So, the compound interest on Rs. 48,000 for 2 years at 20 % p.a., if interest is compounded annually, is Rs. 21,120.
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