Join 60,000+ competitive exam aspirants
or with email
Your Cart
SubtotalтВ╣0
TotalтВ╣0
Examoogle тАв User тАв info@examoogle.com тАв EE-2024-8821
Chapter 1 of 12 тАв Page 1 of 248ЁЯФТ Protected PDF тАв Watermarked
Join 60,000+ competitive exam aspirants
Find the compound interest on Rs. 10,000 at 10% per annum for 2 years compounded annually.
2,100
2,000
1,100
2,200
2,100
Compound interest is calculated by adding the interest of the first period to the principal to form a new base for the second period. For a principal of Rs. 10,000 at 10% rate for 2 years, the total amount after 2 years is calculated as Rs. 12,100, resulting in an interest of Rs. 2,100.
Compound interest is calculated by adding the interest of the first period to the principal to form a new base for the second period. For a principal of Rs. 10,000 at 10% rate for 2 years, the total amount after 2 years is calculated as Rs. 12,100, resulting in an interest of Rs. 2,100.
Think of it like a snowball rolling down a hill; as it gathers snow (interest) on its surface, the new, larger snowball picks up even more snow on the next rotation, causing the growth to accelerate.
A=P(1+100RтАЛ)n тАФ Formula to calculate the total amount where A is amount, P is principal, R is rate, and n is time.
CI=AтИТP тАФ Formula to find Compound Interest by subtracting the original principal from the final amount.
The principle operates on the concept of 'interest on interest', mathematically represented as exponential growth. Unlike Simple Interest, where the growth is linear, Compound Interest follows the function A=P(1+100RтАЛ)n, where the amount increases geometrically over time intervals.
Compound interest results in higher returns compared to simple interest over the same duration.
The interest is compounded annually, meaning the base principal effectively increases at the end of each year.
The power factor n represents the number of compounding periods.
Maximizes wealth accumulation through reinvestment of returns.
Accounts for the time value of money effectively.
Increases the burden of repayment for borrowers over longer durations.
Sensitivity to high interest rates can lead to exponential debt growth.
Banking and financial savings accounts.
Investment growth projections in mutual funds and stocks.
For the first year: SI=10010000├Ч10├Ч1тАЛ=1000. New principal = 11,000.
For the second year: SI=10011000├Ч10├Ч1тАЛ=1100. Total CI=1000+1100=2100.
Option B (Rs. 2,000) is the result of simple interest calculated as SI=100P├ЧR├ЧTтАЛ for 2 years.
A is correct тАФ The total interest earned over 2 years at 10% compounding annually is Rs. 2,100.
Always distinguish between Simple Interest (linear) and Compound Interest (exponential) to avoid errors in time-value calculations.
Get instant step-by-step AI explanations, full shift Previous Year Papers (SSC GD, RRB, SSC JE), and regional rank analysis on the official Examoogle App.
Free Download тАв 100K+ Aspirants