Interest in the second year — Aptitude Question
Interest in the second year: The compound interest for the first year on a sum at 10% per annum is ₹500. Answer and worked solution on CodeKairo.
- Topic: Simple & Compound Interest
- Section: Quantitative Aptitude
- Difficulty: Medium
- Time target: 75 seconds
Question
The compound interest for the first year on a sum at 10% per annum is ₹500. What is the interest for the second year?
Options
- ₹500
- ₹525
- ₹550
- ₹600
Show the answer and the worked solution
Correct answer: C. ₹550
Worked solution
- First year's interest = 10% of P = 500, so P = ₹5,000.
- Amount after one year = ₹5,500.
- Second year's interest = 10% of 5,500 = ₹550.
Answer: ₹550.
The idea
Each year's compound interest exceeds the previous by r% of it. Here ₹500 grows to ₹550, a rise of exactly 10%.
Shortcut. Multiply by 1.1 without finding P: 500 × 1.1 = ₹550, and the same step gives ₹605 for year three.
Common trap. ₹500 — assuming each year's interest is the same, which holds only under simple interest; compound interest also charges 10% on the first ₹500.
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