Question:
A man invests Rs. 5000 for 3 years, at 5% p.a. compound interest reckoned yearly. Income tax at the rate of 20% on the interest earned is deducted at the end of each year. Find the amount at the end of the third year.
A man invests Rs. 5000 for 3 years, at 5% p.a. compound interest reckoned yearly. Income tax at the rate of 20% on the interest earned is deducted at the end of each year. Find the amount at the end of the third year.
Updated On: Oct 3, 2024
- Rs. 5624.32
- Rs. 5630.50
- Rs. 5788.125
- Rs. 5627.20
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The Correct Option is A
Solution and Explanation
Rate of interest = 5% and income tax rate on interest = 20%
80% of interest is added for next year principal
Now effective rate of interest = 80% of 5% = 4% Principal sum = Rs. 5000 and time = 3 years
Therefore, Amount under compound interest =\(P(1+\frac{r}{100})^t\)
=\(5000(1+\frac{4}{100})^3\)
=\(5000\times\frac{26}{25}\times\frac{26}{25}\times\frac{26}{25}\)
=\(17526\times\frac{8}{25}=\)Rs.5624.32
The correct answer is (A) :Rs. 5624.32
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