Rs. 6000 is invested in a scheme of compound interest (compounding annually) at the annual rate of 20 percent. What will be the difference between compound interest of second year and third year?
Show answer & explanation
Correct answer: B
Explanation
Given:
Principal = ₹6,000
Interest Rate = 20% per annum
According to the formula:
Interest for the year = Amount at the beginning of that year × r / 100
Interest for the first year = 6,000 × 20 / 100 = 1,200
Amount after the first year = 6,000 + 1,200 = 7,200
Interest for the second year = 7,200 × 20 / 100 = 1,440
Amount after the second year = 7,200 + 1,440 = 8,640
Interest for the third year = 8,640 × 20 / 100 = 1,728
Difference = 1,728 − 1,440 = 288