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    Question

    What is the interest earned when Rs. 4000 is invested

    for 2 years in a scheme which offers compound interest (compounded every 12 months) of 25% p.a.
    A Rs. 2400 Correct Answer Incorrect Answer
    B Rs. 2500 Correct Answer Incorrect Answer
    C Rs. 2600 Correct Answer Incorrect Answer
    D Rs. 2250 Correct Answer Incorrect Answer

    Solution

    Time period = 24 ├╖ 12 = 2 terms of 12 months each Effective rate of interest = 25 ├Ч (12/12) = 25% So, interest earned = 4000(1 + 25/100)┬▓ тАУ 4000
    = 4000 ├Ч (125/100)┬▓ тАУ 4000
    = 4000 ├Ч 1.5625 тАУ 4000
    = 6250 тАУ 4000 = Rs. 2250

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