Multiple choice

A sum of Rs. 15,000 is lent at 16% p.a. compound interest. What is the difference between the compound interest for the second year and the third year?

  1. Rs. 544

  2. Rs. 445.44

  3. Rs. 454.88

  4. Rs. 548

  5. Rs. 460
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

CI for 2nd year = 15000 * (1.16^2 - 1.16^1) = 15000 * (1.3456 - 1.16) = 15000 * 0.1856 = 2784. CI for 3rd year = 15000 * (1.16^3 - 1.16^2) = 15000 * (1.560896 - 1.3456) = 15000 * 0.215296 = 3229.44. Difference = 3229.44 - 2784 = 445.44.

AI explanation

The compound interest for the second year is the interest on the first year's amount, so the principal becomes 15000 multiplied by 1.16, which equals 17400, and the second year interest is 17400 multiplied by 0.16, equaling 2784. The amount after two years is 17400 plus 2784, which is 20184, making the third year interest 20184 multiplied by 0.16, which equals 3229.44. The difference between the third year and second year interest is 3229.44 minus 2784, which equals 445.44. The result is Rs. 445.44.

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