Rs. 4000 is invested in a scheme of compound interest (compounding annually) at the annual rate of 15 percent. What will be the difference between compound interest of second year and third year?
Show answer & explanation
Correct answer: B
Explanation
Given:
Principal = ₹4,000
Interest Rate = 15% per annum
According to the formula:
Interest for the year = Amount at the beginning of that year × r / 100
Interest for the first year = 4,000 × 15 / 100 = 600
Amount after the first year = 4,000 + 600 = 4,600
Interest for the second year = 4,600 × 15 / 100 = 690
Amount after the second year = 4,600 + 690 = 5,290
Interest for the third year = 5,290 × 15 / 100 = 793.5
Difference = 793.5 − 690 = ₹103.5