A new mobile phone costs Rs.100000. The depreciation of mobile phones is very high as new models with better technological advantages are coming into the market. The depreciation is as high as 50% every year. How much will the cost of a mobile phone be after two years?

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Rs.12500

Rs.25000

Rs.50000

Rs.75000

answer is B.

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Detailed Solution

We have given,
Principal amount (P) = Rs.100000.
Rate (R) = 50% p.a.
Time period (t) = 2 years.
We know that Compound Interest is given by,

C . I . = P 1 + R 100 t − P

⇒ C . I . = 100000 1 − 50100 2 − 100000 ∵ there is a depreciation

⇒ C . I . = 100000 100 − 50 100 2 − 100000

⇒ C . I . = 100000 50100 × 50100 − 100000

⇒ C . I . = 10 50 × 50 − 100000

⇒ C . I . = 25000 − 100000

The amount for compound interest when compounded for 1 year is given by,
Amount = C.I. + P
Therefore, Amount =

Rs . 25000 − 100000 + 100000 = Rs .25000.

Therefore, the cost of the mobile phone after 2 years will be Rs.25000.
Hence, option (2) is correct.

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