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What is the compound interest on Rs. 8000 at the rate of 10% per annum compounded annually for 2 years? Options Rs. 1600 Rs. 1760 Rs. 1680 Rs. 1840

Question

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Solution

The formula for compound interest is A = P (1 + r/n)^(nt), where:

  • A is the amount of money accumulated after n years, including interest.
  • P is the principal amount (the initial amount of money).
  • r is the annual interest rate (in decimal).
  • n is the number of times that interest is compounded per year.
  • t is the time the money is invested for in years.

Given in the problem:

  • P = Rs. 8000
  • r = 10% per annum = 0.10 (in decimal)
  • n = 1 (since it is compounded annually)
  • t = 2 years

Substitute these values into the formula:

A = 8000 (1 + 0.10/1)^(1*2) A = 8000 (1 + 0.10)^2 A = 8000 (1.10)^2 A = 8000 * 1.21 A = Rs. 9680

The compound interest is the difference between the final amount and the principal, which is Rs. 9680 - Rs. 8000 = Rs. 1680.

So, the compound interest on Rs. 8000 at the rate of 10% per annum compounded annually for 2 years is Rs. 1680.

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