Question

Calculate the amount and the compound interest on Rs. 7,500 in 2 years and at 6% compounded annually.
A) Rs. 563
B) Rs. 927
C) Rs. 1433
D) Rs. 1921

Answer 1

Hint: In this question, first we will try to calculate amount by using formula Amount = P${\left( {1 + \dfrac{R}{{100}}} \right)^n}$ where, P = Principal, R = rate, n = time. We can find the compound interest by subtracting Principal from Amount.
CI = Amount – Principal.

Complete step-by-step answer:
Given,
Principal = Rs. 7,500
Time = 2 years
Rate = 6%
We know that Amount = P${\left( {1 + \dfrac{R}{{100}}} \right)^n}$
Where, P = principal, R = Rate, n = time
Putting the values in the above formula to find Amount.
Amount = P${\left( {1 + \dfrac{R}{{100}}} \right)^n}$
               = 7500${\left( {1 + \dfrac{6}{{100}}} \right)^2}$= 7500 $ \times \dfrac{{106}}{{100}} \times \dfrac{{106}}{{100}}$= Rs. 8,427
We know that compound interest = Amount – Principal
                                                              = 8,427 – 7,500 = Rs. 927
Hence, the compound interest is Rs. 927

Therefore, option B is correct.

Note: Compound Interest is the interest calculated on the principal and the interest accumulated over the previous period. It is different from Simple Interest where interest is not added to the principal while calculating the interest during the next period. Compound interest used in bank transactions, bank loans etc. We know that Compound Interest is the difference between amount and principal. CI = Amount – Principal where Amount = P${\left( {1 + \dfrac{R}{{100}}} \right)^n}$. There is an important thing to note: Simple interest and compound interest is the same in the first year. Other than the first year, the interest compounded annually is always greater than in case of simple interest.