Question

The compound interest on Rs. 5000 at 4% per annum is Rs. 408. The period (in years) is:
1. 2
2. 3
3. 1.5 
4. 5

Answer 1

Correct Answer - Option 1 : 2

Given:

Principal = Rs. 5000

Rate of Interest = 4%

CI = Rs. 408

Formula:

Amount = P(1 + R/100)ⁿ

Amount = P + Interest

Here, P = Principal, R = Rate, n = Time

Calculations:

Amount = 5000 + 408 = Rs. 5408

Let the time period = n years

⇒ 5000(1 + 4/100)ⁿ = 5408

⇒ (1 + 4/100)ⁿ = 5408/5000

⇒ (1 + 4/100)ⁿ = 2704/2500

⇒ (52/50)ⁿ = (52/50)²

⇒ n = 2 years

∴ Required time period is 2 years.