alleryOn Rs 20,000 at 8 per cent compounded annually, what is the interest for the second year alone?
ARs 1,600
BRs 1,660
CRs 1,728
DRs 1,800
Answer & Solution
Correct answer: C. Rs 1,728
1. Year 1 interest = (8/100) x 20000 = Rs 1,600.
2. That interest is added to the principal, giving Rs 21,600 for year 2.
3. Year 2 interest = (8/100) x 21600 = Rs 1,728.
4. The Rs 128 rise over year 1 is the compounding effect.
5. Answering Rs 1,600 assumes simple interest, which is the trap.
_Source: syllabus Maths Ch7 'Comparing Quantities', section 7.4_
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