Question

What is the compound interest on Rs. 4800 for 30 month, if the interest is compounded annually at the rate of 8% per annum is (rounded the compound to the interest nearest integer)?
1. Rs. 960
2. Rs. 1023
3. Rs. 1032
4. Rs. 1021

Answer 1

Correct Answer - Option 2 : Rs. 1023

Given 

Principal (P) = Rs 4800

Rate of interest (R) = 8% per annum

Time(t) = 30 months = 2.5 years

Formula Used 

Amount = \(P(1 \ + \ \frac{r}{100})^t\)

Compound interest = Amount - Principal

Calculation

Interest for 1st year

⇒ Amount =\(4800(1 \ + \ \frac{8}{100})^1\)

⇒ Amount = \(4800( \frac{108}{100})\) = Rs. 5184

Interest = 5184 - 4800 = Rs. 384

Interst for second year

⇒ Amount = \(5184(1 \ + \ \frac{8}{100})^1\)

⇒ Amount = \(5184( \frac{108}{100})\) = Rs. 5598.72

Interest = 5598.72 - 5184 = Rs. 414.72

Interest for 3rd year

⇒ Amount = \(5598.72(1 \ + \ \frac{8}{100})^1\)

⇒ Amount = \(5598.72( \frac{108}{100})\) = Rs. 6046.61

Interest = 6046.61 = 5598.72 = 447.85

Interest for half year = 447.85/2 = Rs. 223. 92

Total interest for 30 months

384 + 414.72 + 223. 92 = Rs = 1022.64 ≈ Rs. 1023

∴ The correct answer is Rs. 1023