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What is the principle amount which earns Rs.132 as compound interest for the second year at 10 % per annum?

Correct answer: B. Rs. 1200

  • A. Rs. 1000
  • B. Rs. 1200
  • C. Rs. 1320
  • D. None of these

Explanation

The interest earned during the second year is 10% of the amount after the first year, which is P x 1.10. Hence Rs.132 = P x 1.10 x 0.10 = P x 0.11, so P = Rs.132 ÷ 0.11 = Rs.1,200. Students often choose Rs.1,320 by treating Rs.132 as 10% of the original principal rather than 10% of the increased first-year amount.

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