Multiple choice

A savings account offers an annual compound interest rate of 4%, compounded quarterly. If Sam deposits Rs. 2,000 into the account at the beginning of the year, how much interest to the nearest rupee will he earn by the end of the year?

  1. 75

  2. 78

  3. 81

  4. 83

  5. 84
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Principal = 2000, Rate = 4% annually, compounded quarterly (1% per quarter). Amount after 4 quarters = 2000 * (1 + 0.01)^4 = 2000 * 1.040604 = 2081.208. Interest = 81.208, which rounds to 81.

AI explanation

Using the compound interest formula A = P(1 + R/100)^N where the quarterly rate is 1% and the number of periods is 4, the amount becomes 2000(1 + 1/100)^4. This evaluates to 2000 * 1.040604, giving a final amount of approximately Rs. 2,081.21. Subtracting the original principal of Rs. 2,000 from this amount results in an interest of Rs. 81.

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