Find the compound interest on ₹ 6,400 at the rate of 12.5% per annum for 2 years.

Options

A. ₹ 1,700
B. ₹ 1,500
C. ₹ 1,600
D. ₹2.000

Answer

To find the compound interest on ₹6,400 at the rate of 12.5% per annum for 2 years, we can follow these steps:

### Step 1: Identify the principal amount and the rate of interest.
- Principal (P) = ₹6,400
- Rate of Interest (R) = 12.5% per annum

**Hint:** Remember that the principal is the initial amount on which interest is calculated.

### Step 2: Convert the rate of interest into a fraction.
- The fractional value of 12.5% is \( \frac{12.5}{100} = \frac{1}{8} \).

**Hint:** Converting percentages to fractions can simplify calculations.

### Step 3: Calculate the interest for the first year.
- Interest for the first year (I1) = Principal × Rate
- \( I1 = 6400 \times \frac{1}{8} = 800 \)

**Hint:** The interest for the first year is calculated on the principal amount only.

### Step 4: Calculate the new principal for the second year.
- New Principal after first year = Original Principal + Interest from the first year
- New Principal = ₹6,400 + ₹800 = ₹7,200

**Hint:** The new principal includes the original amount plus the interest earned in the first year.

### Step 5: Calculate the interest for the second year.
- Interest for the second year (I2) = New Principal × Rate
- \( I2 = 7200 \times \frac{1}{8} = 900 \)

**Hint:** The interest for the second year is calculated on the new principal amount.

### Step 6: Calculate the total compound interest for 2 years.
- Total Compound Interest (CI) = Interest for the first year + Interest for the second year
- \( CI = I1 + I2 = 800 + 900 = 1700 \)

**Hint:** The total compound interest is the sum of the interests from both years.

### Final Answer:
The compound interest on ₹6,400 at the rate of 12.5% per annum for 2 years is ₹1,700.

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