Multiple choice

Mr. Arun borrowed Rs. 6500 at 4% per annum compound interest. The compound interest compounded annually for 2 years is:

  1. Rs. 530.40

  2. Rs. 700.40

  3. Rs. 503.40

  4. Rs. 730.40
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A Correct answer
Explanation

Amount = 6500 * (1 + 0.04)^2 = 6500 * 1.0816 = 7030.40. Interest = 7030.40 - 6500 = 530.40.

AI explanation

Using the compound interest formula, Amount equals Principal multiplied by the quantity (1 plus Rate divided by 100) raised to the power of time. The amount is 6500 multiplied by the square of 1.04, which equals 6500 multiplied by 1.0816, resulting in Rs. 7030.40. Subtracting the principal of Rs. 6500 from this amount gives the compound interest of Rs. 530.40.

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