The compound interest on a certain sum at 10% per annum, compounded annually, is Rs 1331 in the 3rd year. Find the sum.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs 11000
The interest of the 3rd year is 10% of the amount at the end of year 2, and that amount is the sum multiplied by 1.1 for each of the first 2 years.
Amount at the end of year 2 \(=1331\div0.1=13310\)
Sum \(=13310\div1.1^{2}=11000\)
The sum is Rs 11000.
Why the other options are incorrect
Option (1) Rs 12100 — Incorrect. On Rs 12100 the interest of the 3rd year would be Rs 1464.1.
Option (3) Rs 10000 — Incorrect. On Rs 10000 the interest of the 3rd year would be Rs 1210.
Option (4) Rs 13310 — Incorrect. On Rs 13310 the interest of the 3rd year would be Rs 1610.51.