Multiple choice

A man invests Rs.5000 for 3 years at 5% p.a.compound interest reckoned yearly. Income tax at the rate of 20% on the interest earned is deducted at the end of each year. Find the amount at the end of the third year.

  1. Rs. 5624.32

  2. Rs. 5630.50

  3. Rs. 5788.125

  4. Rs. 5627.20
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Year 1: Interest = 5000 × 0.05 = 250. Tax = 250 × 0.20 = 50. Amount = 5000 + 250 - 50 = 5200. Year 2: Interest = 5200 × 0.05 = 260. Tax = 260 × 0.20 = 52. Amount = 5200 + 260 - 52 = 5408. Year 3: Interest = 5408 × 0.05 = 270.40. Tax = 270.40 × 0.20 = 54.08. Amount = 5408 + 270.40 - 54.08 = 5624.32. Option A is correct.

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