Multiple choice

A businessman borrowed the Rs.$45$ lakh for two years at the rate $2.5\%$ p.a. compounded annually. Calculate the compound interest by simple interest method.

  1. $2,23000$
  2. $2,27,812.5$
  3. $5,65,563$
  4. $2,00,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest = P * R * T / 100 = 45,00,000 * 2.5 * 2 / 100 = 2,25,000. Compound interest = P * ((1 + R/100)^T - 1) = 45,00,000 * ((1.025)^2 - 1) = 45,00,000 * (1.050625 - 1) = 45,00,000 * 0.050625 = 2,27,812.5.

AI explanation

For a principal of 4500000, the simple interest for the first year is (4500000 * 2.5 * 1) / 100, which is 112500. Using the effective compound interest formula for two years, CI = P(R/100)^2 + 2 * P * R / 100, the calculation becomes 4500000(0.025)^2 + 2(112500). Solving 2812.5 + 225000 gives the total interest as 227812.5.

Keep practicing — related questions