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    Question

    A person invests a sum of money

    in a bank at a certain rate of interest. The interest earned at the end of the second and third years are Rs. 7,200 and Rs. 8,640, respectively. If the interest is compounded annually, find the interest earned at the end of the fourth year.
    A Rs.10,468 Correct Answer Incorrect Answer
    B Rs.10,368 Correct Answer Incorrect Answer
    C Rs.12,468 Correct Answer Incorrect Answer
    D Rs.9,300 Correct Answer Incorrect Answer

    Solution

    ATQ,

    In compound interest, the difference between interests earned in two consecutive years is the interest earned on the interest of the previous year. So, the difference between interest earned in the second and third years: = 8,640 - 7,200 = Rs. 1,440 So, rate of interest = (1,440/7,200) ├Ч 100 = 20% Therefore, interest earned in the fourth year = 8,640 ├Ч 1.2 = Rs.10,368

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