Multiple choice

A sum of Rs. $500$/- was lent for two years at $2\%$ compound interest. The interest for two years will be

  1. Rs. $20$
  2. Rs. $25$
  3. Rs. $50.20$
  4. Rs. $20.20$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Compound interest = P * ((1 + r/100)^n - 1) = 500 * ((1 + 0.02)^2 - 1) = 500 * (1.0404 - 1) = 500 * 0.0404 = 20.20.

AI explanation

Using the effective rate formula for compound interest over two years, the total interest percentage is 2 + 2 + (2 x 2) / 100 = 4.04%. Calculating 4.04% of the principal of Rs. 500 gives (500 x 4.04) / 100 = 20.20. The interest for two years is Rs. 20.20.

Keep practicing — related questions