Direction: These questions are based on the information give in the following graph.
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Madhava invested Rs. 1500 in Company 'B' in 2005 for two years with a condition to get the compound interest at the same rate as 2005. What was the amount of interest earned?
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- Rs. 4387.75
- Rs. 4578.50
- Rs. 4578.75
- Rs. 4837.50
Correct Option: D
Compound interest = P(1 + r)t - P
or Compound interest = P[(1 + r)t - 1]
where P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate
t = the number of years the money is invested or borrowed for.
Required amount of interest earned by Madhava in 2007 = 15000[(1+ 15/100)2 - 1]
= 15000[(115/100)2 - 1]
= 15000[(23/20)2 - 1]
= 15000[(23 x 23 /20 x 20) - 1]
= 15000[ (529/400) - 1]
= 15000[(529 - 400)/400]
= 15000 x 129/400
= 19350/4
= Rs. 4837.50
