Correct Answer - Option 3 : Rs. 880
Given:
Principal = Rs. 5000
Rate of interest being 5% during the first year.
Rate of interest being 12% per annum during second year.
Formula used:
Interest = r% of P
Calculation:
Interest after first year = 5% of 5000
⇒ (5 × 5000)/100
⇒ Rs. 250
Amount after one year = 5000 + 250 = Rs. 5250
Interest after first year = 12 % of 5250
⇒ (12 × 5250)/100
⇒ Rs . 630
Total interest in two years = 250 + 630 = Rs. 880
∴ Total interest in two years is Rs. 880.