A sum of Rs. 1000 is invested on compound interest (Compounded annually) for three years. If the rate of interest is 10% per annum for the first two years and 50% per annum for the third year, what will be the interest?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 815
Under compound interest each year’s interest is added to the amount, so each year’s rate multiplies the amount of the year before. With different rates, each year has its own multiplier.
Amount after 3 years, one multiplier for each year: \(1000\times1.1\times1.1\times1.5\)
After the first two years at 10%: \(1000\times1.21=1210\)
After the third year at 50%: \(1210\times1.5=1815\)
Interest \(=1815-1000=\) Rs. 815