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Asked in a 2000 paper

If the rate of interest be 4% per annum for first year 5% per annum for the second year and 6% per annum from the third year then the compound interest of Rs 10000 for 3 years will be_________?

Correct answer: A. Rs 1575.20

  • A. Rs 1575.20
  • B. Rs 1600
  • C. Rs 1625.80
  • D. Rs 2000

Explanation

The amount after the three different annual rates is 10,000 Rs x 1.04 x 1.05 x 1.06 = 11,575.20 Rs. Hence, compound interest is 11,575.20 Rs - 10,000 Rs = 1,575.20 Rs. Students may choose 1,600 Rs by adding the three percentage rates and ignoring compounding on earlier interest.

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Percentages express a quantity as parts per hundred and support calculations involving increases, decreases, discounts, commissions, taxes, and successive changes. Questions require distinguishing percentage change from percentage points and identifying the original value when a final value and its percentage change are given.

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