Multiple choice

Shiva deposits Rs. 20,000 at the rate of 12% p.a. for 2 years in a bank. Find the interest earned on it if the interest is compounded annually.

  1. Rs. 5088

  2. Rs. 6088

  3. Rs. 6580

  4. Rs. 7580

  5. Rs. 7780
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A Correct answer
Explanation

Compound interest = P * ((1 + r/100)^n - 1) = 20000 * ((1.12)^2 - 1) = 20000 * (1.2544 - 1) = 20000 * 0.2544 = 5088.

AI explanation

Using the compound interest formula Amount equals Principal multiplied by (1 plus Rate divided by 100) raised to the time in years, the amount becomes 20,000 multiplied by (1 plus 12 divided by 100) squared, which is 20,000 multiplied by 1.12 squared. This calculates to 20,000 multiplied by 1.2544, giving a total amount of Rs. 25,088. Subtracting the original principal of Rs. 20,000 gives the earned interest of Rs. 5088.

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