What will be the compound interest on a sum of ₹ 1200 for 2 years at the rate of 20% per annum when the interest is compounded yearly?
Answer & explanation
Correct answer: option 4
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 1200 [ 1 + \(\frac{20}{100}\) ]² - 1200
= 1200 [ \(\frac{6}{5}\) × \(\frac{6}{5}\) - 1 ]
= 1200 [ \(\frac{36}{25}\) - 1 ]
= 1200 [ \(\frac{11}{25}\) ]
= Rs. 528