Question

If a sum of Rs.40,000 is invested at compound interest for 2 years at the annual interest rate of \(20\%\), then what is the interest earned?

• A. Rs.15,200
• B. Rs.17,600
• C. Rs.16,400
• D. Rs.18,800

Answer 1

The Correct Option is B

Compound Interest Calculation 

The formula for compound interest is:

\[ A = P \left( 1 + \frac{r}{100} \right)^t \]

Where:

• P = 40,000 (Principal)
• r = 20% (Rate of interest)
• t = 2 years (Time period)

Substituting the values into the formula:

\[ A = 40,000 \left( 1 + \frac{20}{100} \right)^2 \] \[ A = 40,000 \times (1.2)^2 \] \[ A = 40,000 \times 1.44 = 57,600 \]

The total amount after 2 years is Rs. 57,600.

The interest earned is given by:

\[ \text{Interest} = A - P = 57,600 - 40,000 = 17,600 \]

Conclusion: The interest earned is Rs. 17,600.

The correct answer is (b) Rs. 17,600.