Multiple choice

Find compound interest on Rs. 6250 at 16% per annum for 2 years, compounded annually.

  1. Rs. 2160

  2. Rs. 2340

  3. Rs. 1520

  4. Rs. 3120
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A Correct answer
Explanation

The amount A = P(1 + r/100)^n = 6250(1 + 16/100)^2 = 6250(1.16)^2 = 6250 * 1.3456 = 8410. The compound interest is 8410 - 6250 = 2160.

AI explanation

Using the formula for the difference between compound interest and simple interest for 2 years, we get Difference = P * (R / 100)^2. Substituting the given values, we have 6250 * (16 / 100)^2 = 6250 * (256 / 10000) = Rs 160. The simple interest is calculated as (6250 * 16 * 2) / 100 = Rs 2000. Adding the difference to the simple interest gives the compound interest: 2000 + 160 = Rs 2160.

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