Compound interest on ₹20,000 for two years — Aptitude
Compound interest on ₹20,000 for two years: What is the compound interest on ₹20,000 at 10% per annum for 2 years,… Answer and worked solution on CodeKairo.
- Topic: Simple & Compound Interest
- Section: Quantitative Aptitude
- Difficulty: Easy
- Time target: 50 seconds
Question
What is the compound interest on ₹20,000 at 10% per annum for 2 years, compounded annually?
Options
- ₹4,000
- ₹4,200
- ₹4,400
- ₹4,800
Show the answer and the worked solution
Correct answer: B. ₹4,200
Worked solution
- Amount = 20,000 × 1.1² = 20,000 × 1.21 = ₹24,200.
- CI = 24,200 − 20,000 = ₹4,200.
Answer: ₹4,200.
The idea
For two years, CI% = 2r + r²/100 = 21%. The extra 1% is the interest earned on the first year's interest.
Shortcut. Step it: year one earns ₹2,000, year two earns 10% of 22,000 = ₹2,200, total ₹4,200.
Common trap. ₹4,000 — taking 10% for 2 years as a flat 20%, which is simple interest; the second year also earns 10% on the first year's ₹2,000.
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