A person invests ₹30,000 for 5 years at a certain rate of interest compounded annually. At the end of 1 year, if the sum amounts to ₹34,200, then find the amount at the end of the second year.
Show answer & explanation
Correct answer: A
Explanation
The Correct answer is option 2 i.e. ₹38,988.
Given that:
The principal amount = ₹30,000
Time = 5 years
At the end of 1 year, if the sum amounts to ₹34,200
Formula used:
Amount = Principal (1 + rate/100)time
Calculation:
⇒ 34200 = 30000 (1 + rate/100)1
⇒ 114/100 = 1 + rate/100
⇒ rate = 14% p.a.
The amount at the end of the second year
⇒ Amount = 30000 (1 + 14/100)2
⇒ 30000 × (57/50)2 = Rs. 38988