The compound interest on ₹20,000 at 5% per annum, compounded annually, is ₹2,050. What is the time period?
Answer & explanation
Correct answer: option 2
The Formula that we used here is -
Amount = P$(1 \;+\; \frac{R}{100})^t$
Compound Interest = Amount - Principal
20000 + 2050 = 20000 [ 1 + \(\frac{5}{100}\)]t
22050 = 20000 [ 1 + \(\frac{5}{100}\)]t
\(\frac{441}{400}\) = [ 1 + \(\frac{5}{100}\)]t
(\(\frac{21}{20}\))² = [ \(\frac{21}{100}\)]t
So, t = 2 years