Question
If a person invests ₹50,000 in a scheme offering a
compound interest of 5% per annum, calculate the total amount he will have after 3 years. Assume the interest is compounded annually.Solution
Amount = P(1 + r/n)^(nt). Where P = principal amount = ₹50,000, r = rate = 0.05, n = number of times interest applied per time period = 1, t = number of years = 3. Amount = 50000(1 + 0.05/1)^(1*3) = 50000(1.05)^3 = 50000 * 1.157625 = ₹57,881.25 (approx). Correct answer: A) ₹57,881
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