A money lender borrows a sum of ₹7,000 from market at compound interest at a rate of 5% per annum, compounded annually. The amount paid after two year will be:

Correct option is B

Given:

Principal (P) = ₹7,000

Rate of interest (R) = 5% per annum

Time (T) = 2 years

Compound interest is compounded annually.

Formula Used:
The compound interest formula is:

A = $$P \times \left(1 + \frac{R}{100}\right)^T$$​

Solution :

$$A=7000 \times \left(1 + \frac{5}{100}\right)^2 \\ \ \\= 7000 \times (1.05)^2 = 7000 \times 1.1025 = 7717.50$$​

The amount to be paid after two years is ₹7717.50.