Question

Rs. 50000 is deposited with the compound interest rate of 10% for 2 years. Then the interest earned is

• A. Rs.10200
• B. Rs.10500
• C. Rs.10600
• D. Rs.10100

Hint:

For 10% rate over 2 years, the effective compound interest rate is always 21%. \[ 21\% \text{ of } 50000 = 0.21 \times 50000 = 10500 \]

Answer 1

The Correct Option is B

Concept: Compound interest is calculated on the principal amount and the interest accumulated over previous periods. The final Amount ($A$) and Compound Interest ($CI$) are calculated as: \[ A = P \left( 1 + \frac{R}{100} \right)^n \] \[ CI = A - P \]

Step 1: Substitute the values into the Amount formula.
Given Principal ($P$) = 50000, Rate ($R$) = 10%, Time ($n$) = 2 years. \[ A = 50000 \left( 1 + \frac{10}{100} \right)^2 \] \[ A = 50000 \left( 1.1 \right)^2 \]

Step 2: Perform the squaring and multiplication.
\[ 1.1 \times 1.1 = 1.21 \] \[ A = 50000 \times 1.21 \] \[ A = 60500 \]

Step 3: Calculate the Interest earned.
\[ CI = \text{Total Amount} - \text{Principal} \] \[ CI = 60500 - 50000 \] \[ CI = 10500 \] The interest earned over 2 years is Rs. 10,500. Final Answer: Option B