Multiple choice

If compound interest received on a certain amount in the 2nd year is Rs. 250, what will be the compound interest (in Rs.) for the 3rd year on the same amount at 12% rate of interest?

  1. 250

  2. 300

  3. 280

  4. 270

  5. 290
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Compound interest for the 3rd year is the amount at the end of the 2nd year multiplied by the interest rate. If the 2nd year interest is 250, the principal for the 3rd year is the original principal plus the 1st year interest. However, a simpler way is to note that interest in year n+1 is (1+r) times interest in year n. Thus, 250 * 1.12 = 280.

AI explanation

Let the compound interest for the first year be X, making the interest for the second year equal to X * 1.12, which is given as 250, so X = 250 / 1.12. The compound interest for the third year will be the second year's interest multiplied by 1.12, which is 250 * 1.12 = 280. The compound interest for the third year is Rs. 280.

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