Rs 30000 is lent at compound interest of 7% per annum for 2 years. Find out the amount after two years.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs 34347
Under compound interest, each year’s interest is added to the principal, so the amount after \(n\) years is \(\displaystyle A=P\left(1+\frac{R}{100}\right)^n\).
The amount (putting \(P=30000\), \(R=7\) and \(n=2\) into the formula):
\(\displaystyle A=30000\left(1+\frac{7}{100}\right)^2=30000\times1.07^2\)
Each year multiplies the money by 1.07, so two years multiply it by \(1.07^2=1.1449\)
\(A=30000\times1.1449=34347\), that is Rs 34347