Multiple choice

Mrs. Reema invested Rs. 10000 at 5% per annum compounded annually. What is the amount of interest received by her after 2 years?

  1. Rs. 1500

  2. Rs. 1100

  3. Rs. 1050

  4. Rs. 1125

  5. Rs. 1025
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Compound interest for 2 years at 5% annually on Rs. 10000: Year 1 interest = 10000 x 5% = Rs. 500. New principal = 10000 + 500 = Rs. 10500. Year 2 interest = 10500 x 5% = Rs. 525. Total interest = 500 + 525 = Rs. 1025. Alternatively using formula: CI = P[(1 + r)^n - 1] = 10000[(1.05)^2 - 1] = 10000[1.1025 - 1] = 10000 x 0.1025 = Rs. 1025.

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