Multiple choice

If Rs. 8000 is lent at 10% p.a, the interest being compounded annually, what will the interest for the 5th year (approx.)?

  1. Rs. 1000

  2. Rs. 1171

  3. Rs. 1128

  4. Rs. 2004

  5. Rs. 1698
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest for 5th year = Amount at end of 5 years - Amount at end of 4 years. Amount = 8000 * (1.1)^5 - 8000 * (1.1)^4 = 8000 * (1.1)^4 * (1.1 - 1) = 8000 * 1.4641 * 0.1 = 1171.28.

AI explanation

The interest for the 5th year is equivalent to the compound interest earned on the amount accumulated at the end of 4 years. Using the compound interest formula, the amount at the end of 4 years is 8000 x (1.1)^4 = 8000 x 1.4641 = Rs. 11712.80. The interest for the 5th year is 10% of this accumulated amount: 11712.80 x 0.10 = Rs. 1171.28. The correct answer is Rs. 1171.

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