Question
What is the interest earned when Rs. 5000 is invested
for 2 years in a scheme which offers compound interest (compounded every 12 months) of 20% p.a.Solution
Time period = 24 ÷ 12 = 2 terms of 12 months each Effective rate of interest = 20 × (12/12) = 20% So, interest earned = 5000(1 + 20/100)² – 5000
= 5000 × (120/100)² – 5000
= 5000 × 1.44 – 5000
= 7200 – 5000 = Rs. 2200
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