Multiple choice

A sum of ₹5,000 was deposited for 3 years at 10% per annum, compounded annually. The difference between the interest for 2 years and that for 3 years is:

  1. $₹ 560$
  2. $₹ 506$
  3. $₹ 650$
  4. $₹ 605$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

CI for 2 years: 5000(1.1² - 1) = 5000 × 0.21 = 1050. CI for 3 years: 5000(1.1³ - 1) = 5000 × 0.331 = 1655. Difference: 1655 - 1050 = 605. Alternatively, the extra interest in year 3 is 10% of the amount after year 2: (5000 × 1.21) × 0.10 = 6050 × 0.10 = 605.

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