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A sum of ₹10,000 is invested at 5% compound interest per annum for 2 years. The amount at the end of 2 years will be:
₹11,025
₹10,500
₹11,000
₹11,500
₹11,025
The amount under compound interest for a principal P, rate R, and time n years is calculated using the formula A=P(1+100R)n. For P=10000, R=5%, and n=2, the amount evaluates to ₹11,025.
The amount under compound interest for a principal P, rate R, and time n years is calculated using the formula A=P(1+100R)n. For P=10000, R=5%, and n=2, the amount evaluates to ₹11,025.
Like a snowball rolling down a hill, accumulating more snow with each rotation as it grows larger.
A=P(1+100R)n — Compound Amount formula
CI=A−P — Compound Interest formula
Compound interest calculates interest on both the initial principal and the accumulated interest from previous periods, leading to exponential growth represented by the formula A=P(1+100R)n.
Principal remains dynamic in compound interest due to capitalization of interest.
Interest is compounded annually in this standard scenario.
Bank deposits and loans
Population growth calculations
Option B (₹10,500) represents simple interest for one year or a half calculation.
Option C (₹11,000) represents simple interest for 2 years (10000+1000=11000).
A is correct — The compound amount for ₹10,000 at 5% per annum for 2 years is ₹11,025.
Always distinguish between simple interest (linear growth) and compound interest (exponential growth) to avoid common calculation errors in exams.
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