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CA Foundation Exam  >  CA Foundation Questions  >  If P = 1000, n = 4 yrs., R = 5% p.a then C. I... Start Learning for Free
If P = 1000, n = 4 yrs., R = 5% p.a then C. I will be
  • a)
    Rs. 215.50
  • b)
    Rs. 210
  • c)
    Rs. 220
  • d)
    none of these
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
If P = 1000, n = 4 yrs., R = 5% p.a then C. I will bea)Rs. 215.50b)Rs....
Given:
  • P = Rs. 1000 (Principal)
  • n = 4 years (Time)
  • R = 5% per annum (Rate of Interest)
  • C.I. = Compound Interest (to be calculated)
Step 1: Formula for Compound Interest (C.I.)
The formula to calculate compound interest is:
A = P * (1 + R/100)n
Where:
  • A = Amount after interest
  • P = Principal
  • R = Rate of interest
  • n = Number of years
Step 2: Calculate the Total Amount (A)
Substitute the values P = 1000, R = 5, and n = 4 into the formula:
A = 1000 * (1 + 5/100)4
Simplify the expression:
A = 1000 * (1 + 0.05)4
A = 1000 * (1.05)4
Now, calculate (1.05)4:
(1.05)4 ≈ 1.21550625
So, the amount (A) is:
A = 1000 * 1.21550625 = 1215.51
Step 3: Calculate Compound Interest (C.I.)
Compound Interest (C.I.) is the total amount minus the principal:
C.I. = A - P
C.I. = 1215.51 - 1000 = 215.51
Conclusion:
The Compound Interest (C.I.) is approximately Rs. 215.50.
The correct answer is:
A: Rs. 215.50
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Most Upvoted Answer
If P = 1000, n = 4 yrs., R = 5% p.a then C. I will bea)Rs. 215.50b)Rs....
To calculate the compound interest (CI), we can use the formula:

CI = P * (1 + R/100)^n - P

Where:
P = Principal amount (initial investment) = Rs. 1000
n = Number of years = 4
R = Rate of interest = 5% p.a.

Let's substitute the values into the formula and calculate the CI.

CI = 1000 * (1 + 5/100)^4 - 1000
= 1000 * (1.05)^4 - 1000
= 1000 * 1.21550625 - 1000
= 1215.50625 - 1000
= Rs. 215.50625

Now, let's round off the CI to the nearest rupee, which is Rs. 216. Since none of the given options match Rs. 216, we need to determine the closest option.

Comparing the options:
a) Rs. 215.50
b) Rs. 210
c) Rs. 220
d) None of these

The closest option to Rs. 216 is Rs. 215.50, which is option A.

Therefore, the correct answer is option A, Rs. 215.50.

In conclusion, the compound interest (CI) for an initial investment of Rs. 1000 at a rate of 5% per annum for 4 years is Rs. 215.50.
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Community Answer
If P = 1000, n = 4 yrs., R = 5% p.a then C. I will bea)Rs. 215.50b)Rs....
CI=P(1+i)^n -1
where I=0.05,P=1000,n=4
1000(1.05)^4-1
1000(1.2155-1)
1000(0.2155)
=215.50-option(a)
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