Question 29
EasyOriginal questionAt 10% per annum compounded annually, the interest on a deposit for the first year is ₹500. What is the interest for the third year?
Show the answer and explanation
CorrectNot quiteAnswer D
Correct answer: D
Explanation
Each year's interest is 10% more than the previous year's, because it is earned on a bigger balance.
Second year: ₹500 × 1.1 = ₹550.
Third year: ₹550 × 1.1 = ₹605.
Worth noting
₹600 adds a fixed ₹50 every year, which is not how compounding works: the increase itself grows. ₹500 would be right only for simple interest, and ₹550 is the second year's interest.
- Concept
- Interest earned in a particular year at compound interest
- Typical timeTypical
- 40 s
- Your timeYours
- —
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