Question

Find Compound Interest on Rs. 1050 for 2 years, compounded annually at a rate of 10% per annum.
1. Rs. 220.50
2. Rs. 220
3. Rs. 105
4. Rs. 270.50

Answer 1

Correct Answer - Option 1 : Rs. 220.50

Given

Sum of money(P) = Rs. 1050

Rate of interest(r) = 10% p.a.

Time(n) = 2 years

Formula used

Compound interest(CI) = Amount(A) - Principal(P)

Amount(A) =  Principal × [1 + r/100]n 

Calculation

A = P × [1 + r/100]n 

⇒ A = 1050 × [1 + 10/100]²

⇒ A = 1050 × [11/10]²

⇒ A = 1050 × 121/100 = Rs 1270.50

⇒ CI = A - P = 1270.50 - 1050

⇒ CI = Rs 220.50