The compound interest on Rs.50000 at 4% per annum for 2 years compounded annually is,

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Rs.4000

Rs.4080

Rs.4280

Rs.4050

answer is B.

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Detailed Solution

It is given that, principal amount (P) = Rs.50000.
Interest rate (R) = 4% p.a.
Time (T) = 2 years
The formula for compound interest if the interest is compounded annually is,

C . I . = P 1 + R 100 T − P ... (1)

Substituting the values, we get

C . I . = 50000 1 + 4100 2 − 50000

⇒ C . I . = 50000 100 + 4 100 2 − 50000

⇒ C . I . = 500001041002 − 50000

⇒ C . I . = 50000 × 1081610000 − 50000

⇒ C . I . = 5 × 10816 − 50000

⇒ C . I . = 5 10816 − 10000

⇒ C . I . = 5 × 816

⇒ C . I . = 4080

Therefore, the compound interest on Rs.50000 at 4% per annum for 2 years that is compounded for 1 year is Rs.4080.
Hence, option (2) is correct.

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