Question

If the simple interest for 4 years is Rs. 2000 at 10% rate of interest. Find the compound interest for the 2 year on same rate.

1. 1100
2. 1050
3. 1000
4. 1150

Answer 1

Correct Answer - Option 2 : 1050

Given:

P = 2000, R = 10%, Time = 4 year

Formula used:

Total amount = Principal × [1 + (Rate of interest/100)]^{Time period}

Compound interest = Total amount – Principal

Simple interest = (principal amount × rate of interest × time)/100

Calculation:

Let principal amount P

S.I. = (P × R × T)/100

⇒ 2000 = (P × 10 × 4)/100

⇒ 20000 = 4P

⇒ P = 5000

For C.I. t = 2 year Principal amount (P) = 5000 and rate of interest 10%

Total amount = P × [1 + (R/100)]²

⇒ Total amount = 5000 × [1 + (10/100)]²

⇒ Total amount     = 5000 × [(10 + 1)/10]²

⇒ Total amount     = 5000 × (11/10)²

⇒ Total amount = 5000 × (121/100)

⇒ Total amount = 6050

 C.I. = Total amount – Principal amount

⇒ C.I. = 6050 – 5000

⇒ C.I. = 1050

∴ Compound interest is 1050