InterviewSolution
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A man invests Rs. 6000 for 3 years at 8% p.a. compound interest reckoned yearly. Income tax at the rate of 20% on the interest earned is deducted at the end of each year. Find the amount at the end of the third year.1). Rs. 7125.422). Rs. 7546.83). Rs. 6792.64). Rs. 7227.3 |
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Answer» Now the formula for compound interest can be given as CI = P(1 + R/100)t - P Where CI = Compound Interest P = Principal R = Rate of interest T = Time period In our CASE the interest EARNED at the end of first YEAR can be given as CI = 6000(1.08)1-6000 CI = Rs. 480 Income tax @20% is DEDUCTED on the interest earned ∴ 480 × 0.2 = 96 ∴ Amount at the end of first year = 6000 + 480-96 = 6384 Now the amount at the end of first year is TAKEN as principal at the beginning of second year ∴ Interest earned at the end of second year CI = 6384(1.08) - 6384 = Rs. 510.72 Income tax deducted = 510.72 × 0.2 = 102.144 ∴ Amount at the end of second year = 6384 + 510.72 - 102.144 = 6792.576 Interest earned at the end of third year CI = 6792.576(1.08) - 6792.576 = 543.40 Income tax deducted = 543.40 × 0.2 = 108.68 ∴ Amount at the end of third year = 6792.576 + 543.4 - 108.68 = 7227.296 |
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