What will be the total amount payable after 3 years on a principal of ₹4,000 at 5% per annum, compounded annually?
- AOption (a)
₹4,630.50
- BOption (b)
₹4,550.50
- COption (c)
₹4,600.50
- DOption (d)
₹4,050.50
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Correct answer
₹4,630.50
Why this answer is correct
Shortcut Trick
Rate = 5% = 1/20 → Principal : Amount ratio for 1 year = 20 : 21.
For 3 years, Ratio = (20)3 : (21)3 = 8000 : 9261.
Given 8000 units = ₹4,000 ⇒ 1 unit = ₹0.5.
Total Amount = 9261 × 0.5 = ₹4,630.50.
∴ The correct answer is ₹4,630.50.
Alternate Method
Given:
Principal (P) = ₹4,000
Rate (R) = 5% per annum
Time (n) = 3 years
Formula Used:
Amount (A) = P(1 + R/100)n
Calculations:
⇒ A = 4000 × (1 + 5/100)3
⇒ A = 4000 × (1 + 1/20)3
⇒ A = 4000 × (21/20)3
⇒ A = 4000 × (9261 / 8000)
⇒ A = 9261 / 2
⇒ A = ₹4,630.50
∴ The correct answer is ₹4,630.50.
Additional Information
Compound Interest (CI) Formula
CI = P[(1 + R/100)n − 1], where P is Principal, R is Rate, and n is Time.
Difference between CI and SI for 3 Years
Difference = P(R/100)2 × (3 + R/100). This formula helps find the gap between simple and compound interest quickly.
Successive Percentage Method
The effective rate for 5% over 3 years is calculated as [5 + 5 + (5×5)/100] = 10.25% for 2 years, then combining 10.25% and 5% to get 15.7625% for 3 years.