Question

The compound interest on a certain sum of money for the second year is Rs. 520 at 4% per annum. find the interest for the first year.
1. Rs. 480
2. Rs. 500
3. Rs. 240
4. Rs. 470

Answer 1

Correct Answer - Option 2 : Rs. 500

Given

Compound interest for the second year only = Rs. 520

Concept

Interest for the second year is calculated on the sum of interest of the first year and 4% interest charged on the first-year interest. 

Calculation

Let the interest for first year is Rs. x

x + 4% of x = 520

⇒ (104/100)x = 520

⇒ x = (520 × 100)/104

⇒ x = Rs.500

∴ Compound interest for first year is Rs. 500