Multiple choice

What is the principal amount which earns Rs. 1320 as compound interest for the second year at 10% per annum?

  1. Rs. 10000

  2. Rs. 12000

  3. Rs. 13200

  4. Rs. 11880
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Compound interest for 2nd year = P(1+r)^2 - P(1+r) = P(1+r)r. 1320 = P(1.1)(0.1) = P(0.11). P = 1320 / 0.11 = 12,000.

AI explanation

Let the principal be P, so the total amount after the first year becomes P times 1.10. The compound interest earned specifically during the second year is 10 percent of this accumulated amount, which gives 0.10 times 1.10P equal to 0.11P. Setting this equal to the given second year interest of Rs. 1320, we find P = 1320 divided by 0.11, which results in a principal of Rs. 12000.

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