Question

25,000/- is borrowed at compound interest at the rate of 3% for first year, 4% for 2nd year and 5% for 3rd year. Find the amount to be paid after 3 years.

• A. 28,119/-
• B. 28,120/-
• C. 28,118/-
• D. 28,117/-

Answer 1

The Correct Option is A

To solve the problem of finding the total amount to be paid after 3 years with varying rates of compound interest, we will calculate the compounded amount for each year separately and sequentially. 

1. Initially, the principal amount is \(P = 25000\).
2. For the first year, the interest rate is 3%. We calculate the amount at the end of the first year using the formula for compound interest: \(A = P(1 + \frac{r}{100})\), where \(r\) is the rate of interest.

Substituting the values, we get: \(A = 25000(1 + \frac{3}{100}) = 25000 \times 1.03 = 25750\).

1. For the second year, the principal amount is the amount at the end of the first year, i.e., 25750.

The interest rate for this year is 4%. So, the amount at the end of the second year is: \(A = 25750(1 + \frac{4}{100}) = 25750 \times 1.04 = 26780\).

1. For the third year, the principal amount is the amount at the end of the second year, i.e., 26780.

The interest rate for this year is 5%. So, the amount at the end of the third year is: \(A = 26780(1 + \frac{5}{100}) = 26780 \times 1.05 = 28119\).

1. Therefore, the total amount to be paid after 3 years is \(28,119/-\).

Thus, the correct answer is 28,119/-, matching the given option.