Find the Compound Interest on Rs. 2000 at 10% per annum for 2 ... | General Science MCQ | Examoogle

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Find the Compound Interest on Rs. 2000 at 10% per annum for 2 years compounded annually.

Rs. 400

Rs. 420

Rs. 200

Rs. 440

Correct Answer

📐 MA • Math Concept & PrincipleGeneral ScienceMathematics

Option B

Rs. 420

Quick Summary:

Compound interest is calculated on the principal amount as well as the accumulated interest of previous periods. For a principal of Rs. 2000 at a 10% annual interest rate over 2 years, the total amount becomes Rs. 2420, resulting in a compound interest of Rs. 420.

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🔬SCScience SolutionConcept & Principle

💡 Explanation

💡 Everyday Analogy (Real-World Intuition)

Think of compound interest like a snowball rolling down a hill; as it rolls, it gathers more snow (interest), making it grow larger and faster with each turn.

🧠 Memory Mnemonic / Shortcut Aid

CI = A - P (Compound Interest is Amount minus Principal)

🔢 Key Formulas

$A = P\left(1 + \frac{R}{100}\right)^n$ — Total amount with compound interest

$CI = A - P$ — Compound interest formula

⚙️ Working Principle

The total amount $A$ accrued under compound interest is given by the formula $A = P(1 + \frac{R}{100})^n$ , where $P$ is the principal, $R$ is the rate of interest per annum, and $n$ is the number of years. Subtracting the initial principal $P$ from the total amount $A$ yields the compound interest.

📌 Key Points

▸
Compound interest grows exponentially over time compared to simple interest.
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The interest is added to the principal at the end of each compounding period.

✅ Advantages

▸
Higher returns on investments over long periods

❌ Disadvantages / Limitations

▸
Higher costs when paying back loans

🛠️ Applications / Uses

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Bank savings accounts
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Loan calculations
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Inflation modeling

📄 Additional Information

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Principal $P = \text{Rs. } 2000$ , Rate $R = 10\%$ , Time $n = 2 \text{ years}$ .
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Amount $A = 2000 \times (1 + \frac{10}{100})^2 = 2000 \times (1.1)^2 = 2000 \times 1.21 = \text{Rs. } 2420$ .
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Compound Interest $= 2420 - 2000 = \text{Rs. } 420$ .
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Option A (Rs. 400) represents simple interest for 2 years ( $2000 \times 0.10 \times 2 = 400$ ).

📊 Diagram / Illustration

✅

B is correct — The compound interest on Rs. 2000 at 10% per annum for 2 years is Rs. 420.

Core Concepts Used

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Compound Interest Exponential Growth Financial Mathematics

💡 EXAM TIP

Always distinguish between simple interest (linear growth) and compound interest (exponential growth) when solving quantitative aptitude problems in competitive exams.

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