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Swarna borrowed a sum of ₹12,000 from Jayshree at a rate of 10% per annum on compound interest, compounded annually. Find the total amount paid by Swarna after 2 years to clear all the dues.
₹14,520
₹14,890
₹14,620
₹14,980
₹14,520
Use the multiplier 1.12=1.21. Multiply the principal: 12,000×1.21=14,520.
Principal (P) = ₹12,000, Rate (R) = 10% per annum, Time (n) = 2 years, compounded annually.
A=P(1+100R)n
Use the multiplier 1.12=1.21. Multiply the principal: 12,000×1.21=14,520.
Confusing compound interest with simple interest, which would incorrectly yield 12,000+(12,000×0.10×2)=14,400.
Identify given parameters
We are given the principal P=12,000, the annual interest rate R=10%, and the time period n=2 years.
P=12,000,R=10,n=2
Apply Compound Interest formula
The formula to calculate the total amount after compound interest is A=P(1+R/100)n.
A=12,000(1+10010)2
Solve for the total amount
Simplify the expression: A=12,000×(1.1)2=12,000×1.21.
A=12,000×1.21=14,520
A is correct because the calculated total amount is ₹14,520.
This concept of compounding is fundamental to understanding financial math, including EMI calculations, population growth, and depreciation in physics/engineering.
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