If ₹12000 is invested for two years at compound interest (compounded annually) at the rate of 20% per annum, then what is the interest?
Answer & explanation
Correct answer: option 1
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
= 12000 [ 1 + \(\frac{20}{100}\) ]² - 12000
= 12000 [ \(\frac{6}{5}\) × \(\frac{6}{5}\) - 1 ]
= 12000[ \(\frac{11}{25}\) ]
= Rs. 5280