Multiple choice

Directions: Study the given information carefully to answer the question that follows: Two friends A and B invested Rs. 20,000 and Rs. 15,000, respectively for a period of 3 years. A put the money in a fixed deposit at a compound rate of 8.5% p.a. while B put his money in mutual fund which gave him 12.5% compounded annually. Find the approximate amount of interest earned by A.

  1. Rs. 5546

  2. Rs. 5564

  3. Rs. 5654

  4. Rs. 5645

  5. Rs. 5445
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A Correct answer
Explanation

Interest for A = 20000 * ((1 + 0.085)^3 - 1) = 20000 * (1.277289 - 1) = 20000 * 0.277289 = 5545.78.

AI explanation

Using the compound interest formula, the final amount equals the principal of 20000 multiplied by (1 + 8.5/100) cubed. This simplifies to 20000 multiplied by 1.085 cubed, which results in a total amount of approximately Rs. 25546. The interest earned is the final amount minus the principal, which is 25546 minus 20000, equalling Rs. 5546.

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