What is the compound interest on a sum of Rs. 10,000 at 14% p.a. for 19/7 years where the interest is compounded yearly?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. Rs. 4296.
Cumulative rate of interest of x% and y% = x + y + (xy)/100
r = 14%
Time = 25/7 years
Sum = Rs. 10000
We need to calculate the cumulative rate of interest for years when the rate is 14% per annum.
Rate of interest for 2 years
⇒ 14 + 14 + (14 × 14/100) = 29.96%
Rate of 5/7 years = 14 × 5/7 = 10%
The rate for 25/7 years:
⇒ 29.96 + 10 + (29.96 × 10/100) = 42.956%
Since,
100% = 10000
42.96% = 100 × 42.96 = 4296
⇒ 14 + 14 + (14 × 14/100)
⇒ 28 + 1.96 = 29.96%
⇒ 29.96 + 10 + (29.96 × 10/100)
⇒ 39.96 + 2.996 = 42.956