Question

What is the compound interest on Rs. 48000 for 3 years (interest rounded off to a rupee) if the rate of interest for the first year is 8% per annum and it increases by 2% every subsequent years?
1. Rs. 15867
2. Rs. 14726
3. Rs. 14480
4. Rs. 14528

Answer 1

Correct Answer - Option 1 : Rs. 15867

Given:

Principal (P) = Rs. 48000

Rate of interest for 1^st year = 8%

Rate of interest for 2^nd year = 10%

Rate of interest for 3^rd year = 12%

Formula used:

Amount (A) = \(P(1 + \frac{r}{100})^t\)

Compound interest = Amount - Principal

Where r is Rate of Interest

and t is Time

Calculation:

Amount for 1^st year

A = \(48000(1 + \frac{8}{100})^1\)

⇒ \(48000 \times (\frac{108}{100})\) = Rs. 51840

Amount for 2^nd year

A = \(51840(1 + \frac{10}{100})^1\)

⇒ \(51840 \times (\frac{110}{100})\) = Rs. 57024

Amount for 3^rd year

A = \(57024(1 + \frac{12}{100})^1\)

⇒ \(57024 \times (\frac{112}{100})\) = Rs. 63866.88 ≈ Rs. 63867

Compound interest = 63867 - 48000 = Rs. 15867

∴ There will be interest of Rs. 15867