The amount to which Rs. 5000 will accumulate at the effective rate of 4% for 4 years and 5% for 2 years is
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 6448
An effective rate is the actual yearly compound rate. The amount at the end of the first 4 years is the principal for the next 2 years, so the growth factors multiply:
\(A = 5000\,(1.04)^4\,(1.05)^2\)
\((1.04)^4 = 1.16986\)
\((1.05)^2 = 1.1025\)
\(A = 5000 \times 1.16986 \times 1.1025\)
\(= 5000 \times 1.28977 = 6448.85\)
So the amount is Rs. 6448.85, given in the options as Rs. 6448.